Exploring an uncharted market: Evidence on the unsecured Swiss franc money market

Basil Guggenheim, Sébastien Philippe Kraenzlin and Silvio Schumacher

Issue
2011-05

Pages
36

JEL classification
E40, E42, E44

Keywords
unsecured interbank money market, development, money market turmoil, financial stability, Switzerland

Year
2011

To date, various central banks have lacked detailed statistical evidence on developments in the unsecured interbank money market. Furfine (1999) introduced the idea of calculating unsecured overnight interbank lending by using data of a RTGS system. Based on data from the Swiss payment system (SIC) we developed an algorithm to identify unsecured interbank loans in Swiss francs. In contrast to Furfine (1999) we also identify longer-term transactions. We thereby gain a deeper insight on the size and structure of the unsecured interbank money market in Swiss francs. This is the first time that SIC data have been used to identify transactions and market rates in the unsecured Swiss franc money market. Overall, the estimates show that after the collapse of Lehman Brothers loss of confidence led to a freezing-up of the market for several months and a decrease in daily turnover.