 Interest-rate uncertainty, derivatives usage, and loan growth in bank holding companiesElijah Brewer, Sanjay Deshmukh and Timothy P. Opiela Journal of Financial Stability, 2014, vol. 15, issue C, 230-240 Abstract: We explore one channel through which interest-rate derivatives usage affects loan growth positively in bank holding companies (BHCs). If interest-rate derivatives usage allows a BHC to substitute more freely among sources of funds, then its reliance on less interest-rate-sensitive sources such as core deposits should be lower. We test the hypothesis that if BHCs use interest-rate derivatives to reduce the adverse effects of interest-rate uncertainty on lending, then their loan growth should be less sensitive to core deposit growth. We find that loan growth is less sensitive to core deposit growth for interest-rate derivatives users than for non-users and that this sensitivity is lower when the extent of derivatives usage is higher. One important implication is that the funding flexibility enjoyed by BHCs using interest-rate derivatives should allow these BHCs to provide a smoother and higher level of intermediation, leading to more stable loan growth and greater economic stability. Keywords: Interest-rate uncertainty; Interest-rate derivatives usage; Loan growth; Financial stability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:15:y:2014:i:c:p:230-240 DOI: 10.1016/j.jfs.2014.10.003 Access Statistics for this article Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman More articles in Journal of Financial Stability from Elsevier |
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