Bank exits from interbank markets lead to liquidity drop and credit supply decrease.
The level of money available in the interbank market is important for banks. When a big player leaves, it can make it harder for other banks to get money. A study looked at 207 banks leaving the market between 1997 and 2013 in 52 countries. They found that when a bank with a lot of money in the market leaves, other banks have less money. This can also make it harder for banks to give out loans. This is especially bad for banks that rely a lot on the local market, in developing countries, and before a financial crisis.