Banks' exposure to interest rate risk, their earnings from term transformation, and the dynamics of the term structure

Christoph Memmel

No 2010,07, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: We use a unique dataset of German banks' exposure to interest rate risk to derive the following statements about their exposure to this risk and their earnings from term transformation. The systematic factor for the exposure to interest rate risk moves in sync with the shape of the term structure. At bank level, however, the time variation of the exposure is largely determined by idiosyncratic effects. Over time, changes in earnings from term transformation have a large impact on interest income. Across banks, however, the earnings from term transformation do not seem to be a decisive factor for the interest margin.

Keywords: interest rate risk; term transformation; interest income (search for similar items in EconPapers)
JEL-codes: G11 G21 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (5)

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Journal Article: Banks' exposure to interest rate risk, their earnings from term transformation, and the dynamics of the term structure (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp2:201007

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