# Loan maturity aggregation in interbank lending networks obscures mesoscale structure and economic functions

## TL;DR

This study shows that aggregating loan maturities in interbank networks hides important mesoscale structures and economic functions, with the optimal level of detail depending on market development.

## Contribution

It introduces a comprehensive analysis of multiple loan maturities in interbank networks, revealing the importance of preserving maturity layers for accurate mesoscale structure detection.

## Key findings

- Aggregating maturities obscures mesoscale network structure.
- Optimal maturity granularity varies with market development.
- Different maturity layers correspond to distinct economic functions.

## Abstract

Since the 2007-2009 financial crisis, substantial academic effort has been dedicated to improving our understanding of interbank lending networks (ILNs). Because of data limitations or by choice, the literature largely lacks multiple loan maturities. We employ a complete interbank loan contract dataset to investigate whether maturity details are informative of the network structure. Applying the layered stochastic block model of Peixoto (2015) and other tools from network science on a time series of bilateral loans with multiple maturity layers in the Russian ILN, we find that collapsing all such layers consistently obscures mesoscale structure. The optimal maturity granularity lies between completely collapsing and completely separating the maturity layers and depends on the development phase of the interbank market, with a more developed market requiring more layers for optimal description. Closer inspection of the inferred maturity bins associated with the optimal maturity granularity reveals specific economic functions, from liquidity intermediation to financing. Collapsing a network with multiple underlying maturity layers or extracting one such layer, common in economic research, is therefore not only an incomplete representation of the ILN's mesoscale structure, but also conceals existing economic functions. This holds important insights and opportunities for theoretical and empirical studies on interbank market functioning, contagion, stability, and on the desirable level of regulatory data disclosure.