Banks’ maturity transformation: risk, reward, and policy

Pierluigi Bologna

No 1159, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The aim of this paper is twofold: first, to study the determinants of banks’ net interest margin with a particular focus on the role of maturity transformation, using a new measure of maturity mismatch; second, to analyse the implications for banks of the relaxation of a binding prudential limit on maturity mismatch, in place in Italy until the mid-2000s. The results show that maturity transformation is an important driver of the net interest margin, as higher maturity transformation is typically associated with higher net interest margin. However, there is a limit to this positive relationship as ‘excessive’ maturity transformation — even without leading to systemic vulnerabilities — has some undesirable implications in terms of higher exposure to interest rate risk and lower net interest margin.

Keywords: banks; profitability; maturity transformation; interest rates; macroprudential; microprudential (search for similar items in EconPapers)
JEL-codes: E43 G21 G28 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-ban, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 159/en_tema_1159.pdf (application/pdf)

Related works:
Working Paper: Banks’ Maturity Transformation: Risk, Reward, and Policy (2018)
Working Paper: Banks’ maturity transformation: risk, reward, and policy (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1159_17

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by (angela.barbaro@bancaditalia.it).