Banks’ Management of Interest Rate Risk: Empirical Evidence from Savings Banks and Credit Cooperatives

Platte Daniel
Additional contact information
Platte Daniel: M.Sc., Research Assistant, Finance Center Münster, University of Münster. I thank an anonymous reviewer for worthwile suggestions, Jörn Debener for helpful comments, and Andreas Ernsting and Patrick Pohla for their research assistance. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. Declarations of interest: none.

Zeitschrift für Bankrecht und Bankwirtschaft (ZBB) / Journal of Banking Law and Banking (JBB), 2022, vol. 34, issue 4, 228-239

Abstract: German banking supervisors repeatedly warn of the potential threats arising from the current levels of interest rate risk. Especially banks with a traditional business model that highly depend on income from their interest business have extended their maturity transformation to stabilize the net interest margins with higher term premiums. This paper uses a unique data set comprising balance sheet data from German savings banks and credit cooperatives enhanced with information from their disclosure reports between 2012 and 2020 to analyze the level of interest rate risk and its management. The results suggest that interest rate derivatives are not primarily related to the general level of interest rate risk in banks but may particularly be used by banks to avoid exceeding specific regulatory limits. Furthermore, smaller banks are less likely to use derivatives. However, the results suggest that these banks manage their interest rate risk exposure via higher shares of securities, giving these banks more flexibility in maturity management.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.15375/zbb-2022-0405 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
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:bpj:zfbrbw:v:34:y:2022:i:4:p:228-239:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/zbb/html

DOI: 10.15375/zbb-2022-0405

Access Statistics for this article

Zeitschrift für Bankrecht und Bankwirtschaft (ZBB) / Journal of Banking Law and Banking (JBB) is currently edited by Johannes Köndgen

More articles in Zeitschrift für Bankrecht und Bankwirtschaft (ZBB) / Journal of Banking Law and Banking (JBB) from RWS Verlag
Bibliographic data for series maintained by Peter Golla ().