We use a novel dataset on all interbank money market transactions settled via the Eurosystem’s payment system TARGET2 to study the liquidity allocation among European banks around the Lehman insolvency. We show that a freeze occured only in the term segments of the market. Using global and local network measures we characterize this freeze as a network shrinking process. We show that a bank’s network position within the market has a significant impact on its lending and borrowing activity post-Lehman. Taking the network structure into account is therefore essential in understanding the reaction of the money market to adverse shocks. Joint with: Puriya Abbassi and Silvia Gabrieli.