Bank management of the net interest margin: New measures

Research output: Journal contributionsJournal articlesResearchpeer-review

Authors

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.
Original languageEnglish
JournalFinancial Markets and Portfolio Management
Volume27
Issue number3
Pages (from-to)275-297
Number of pages23
ISSN1555-4961
DOIs
Publication statusPublished - 2013

    Research areas

  • Management studies - Balance-sheet composition, Banking, Net interest margin

Recently viewed

Projects

  1. E-FloCon

Publications

  1. Key criteria for developing ecosystem service indicators to inform decision making
  2. Transformationsnarrative
  3. „More than a game“
  4. Give and take frames in shared-resource negotiations
  5. Was fehlt in der EVS?
  6. Three steps to a solar system
  7. Silver Work
  8. The effects of an active development of the mental model in the training process
  9. The effects of an Internet based self-help course for reducing panic symptoms-Don't Panic Online
  10. Complex Times, Complex Time
  11. 3DMIN – Challenges and Interventions in Design, Development and Dissemination of New Musical Instruments.
  12. Conception and analysis of Cascaded Dual Kalman Filters as virtual sensors for mastication activity of stomatognathic craniomandibular system
  13. Predictive mapping of species richness and plant species' distributions of a peruvian fog oasis along an altitudinal gradient
  14. Evidence on copula-based double-hurdle models with flexible margins
  15. Inner transformation to sustainability as a deep leverage point
  16. A black box identification in frequency domain
  17. Vorstellungsänderung
  18. Assessing the environmental fate of S-metolachlor, its commercial product Mercantor Gold® and their photoproducts using a water-sediment test and in silico methods
  19. Toward a modular evaluation approach of real-world laboratories
  20. Strangely Familiar
  21. Creating uncertainty in the governance of arrival and return: target-group constructions in Bavarian AnkER facilities
  22. Multitrophic diversity in a biodiverse forest is highly nonlinear across spatial scales
  23. Sustainable entrepreneurship: creating environmental solutions in light of planetary boundaries
  24. Multiscale material modeling
  25. Proof of Stake
  26. Work Design and Performance