Interbank Lending in a Generalized Walras Equilibrium

We study a problem of maximizing expected utility of terminal wealth in a two-period market with various assets for a continuum of banks. Due to different liquidity levels, interbank markets arise. Interest rates are set by a Generalized Walras Equilibrium. We determine the banks' optimal behaviour in a general setting and derive conditions for the existence of an equilibirum. We show that the existence of interbank markets smoothes out
different liquidity levels.