Bank management of the net interest margin: New measures
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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Bank management of the net interest margin : New measures. / Memmel, Christoph; Schertler, A.
in: Financial Markets and Portfolio Management, Jahrgang 27, Nr. 3, 2013, S. 275-297.Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Bank management of the net interest margin
T2 - New measures
AU - Memmel, Christoph
AU - Schertler, A.
PY - 2013
Y1 - 2013
N2 - We decompose the change in banks' net interest margin into a change in market-wide bank rates and a change in balance-sheet composition. The usefulness of this decomposition is illustrated for a detailed data set of German bank balance sheets, broken down into different maturities, creditors and borrowers, and degrees of liquidity. Our main findings are as follows. (1) Changes in market-wide bank rates have a much higher explanatory power for net interest margins than changes in balance-sheet composition. (2) On average, banks employ interest rate derivatives to hedge on-balance risk since changes in market-wide rates affect the net interest margin less strongly for derivatives users than for non-users. (3) When risk taking becomes more lucrative, derivatives users tend to increase their on-balance exposure more than do non-users.
AB - We decompose the change in banks' net interest margin into a change in market-wide bank rates and a change in balance-sheet composition. The usefulness of this decomposition is illustrated for a detailed data set of German bank balance sheets, broken down into different maturities, creditors and borrowers, and degrees of liquidity. Our main findings are as follows. (1) Changes in market-wide bank rates have a much higher explanatory power for net interest margins than changes in balance-sheet composition. (2) On average, banks employ interest rate derivatives to hedge on-balance risk since changes in market-wide rates affect the net interest margin less strongly for derivatives users than for non-users. (3) When risk taking becomes more lucrative, derivatives users tend to increase their on-balance exposure more than do non-users.
KW - Management studies
KW - Balance-sheet composition
KW - Banking
KW - Net interest margin
U2 - 10.1007/s11408-013-0212-y
DO - 10.1007/s11408-013-0212-y
M3 - Journal articles
VL - 27
SP - 275
EP - 297
JO - Financial Markets and Portfolio Management
JF - Financial Markets and Portfolio Management
SN - 1555-4961
IS - 3
ER -