Interdependence between assets and liabilities in the banking system: Changes in the last two decades

Valentina Michelangeli and Fabio Massimo Piersanti

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: Asset and liability management is a traditional tool used by intermediaries to limit liquidity and interest rate risks. To assess the evolution of asset-liability linkages, we build and decompose an interdependence index, which decreased between the early 2000s and the onset of the COVID-19 pandemic and started to rise again in 2022 for both larger and smaller Italian banks. The monetary policy operations, the 2012 tax reform, and the low interest rate environment meant there was less need for banks to closely link assets and liabilities in their balance sheets, thus fostering greater independence between investing and financing decisions.

Keywords: Asset-liability management; Banks; Interdependence index (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Interdependence between assets and liabilities in the banking system: changes in the last two decades (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006281

DOI: 10.1016/j.frl.2023.104256

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