Explaining the Czech Interbank Market Risk Premium

Adam Geršl, Jitka Lešanovská

This paper focuses on the development of the interbank market risk premium in the Czech Republic during the global financial crisis. We explain the significant departure of interbank interest rates from the key monetary policy rate by a combination of different factors, including liquidity risk, counterparty risk, foreign influence, interbank relations, and strategic behavior. The results suggest a relevant role of market factors, and some importance of counterparty risk.

JEL codes: G19, G21

Keywords: counterparty risk, interbank market, liquidity risk, risk premium

Issued: July 2013

Download: CNB WP No. 1/2013 (pdf, 519 kB)