Stylized facts in money markets: an empirical analysis of the eurozone data

TL;DR

This paper empirically analyzes eurozone money markets, revealing how regulatory changes affected trading volume, collateral reuse, and network stability, with findings indicating increased network density and symmetry compared to unsecured markets.

Contribution

It provides new empirical evidence on the impact of regulation on interbank market dynamics and network structure in the eurozone.

Findings

Increased trading volume following LCR regulation

Collateral re-use rates align with existing literature

Higher network density and symmetry than unsecured markets

Abstract

Using the secured transactions recorded within the Money Markets Statistical Reporting database of the European Central Bank, we test several stylized facts regarding interbank market of the 47 largest banks in the eurozone. We observe that the surge in the volume of traded evergreen repurchase agreements followed the introduction of the LCR regulation and we measure a rate of collateral re-use consistent with the literature. Regarding the topology of the interbank network, we confirm the high level of network stability but observe a higher density and a higher in- and out-degree symmetry than what is reported for unsecured markets.