We investigate whether banks actively manage their exposure to interest rate risk in the short run. Using bank-level data of German banks for the period 2011Q4- 2017Q2, we find evidence that banks actively manage their interest rate risk exposure in their banking books: They take account of...

This paper investigates determinants of banks' structural exposure to interest rate risk in their banking book. Using bank-level data for German banks, we find evidence that a bank's exposure to interest rate risk depends on its presumed optimization horizon. The longer the presumed optimization...

The prevailing view in the literature is that, in the long run, an increase in the level of interest rates will impact positively on banks' net interest margins. Using a time series of more than 40 years for the German banking system, we confirm this effect (the net interest margin increases by...

We investigate German banks' exposure to interest rate risk. In finance, higher demand for a risky asset is typically associated with higher expected return. However, employing a utility function which implies both risk‐averse and risk‐seeking behavior depending on the level of profits, we...

Using data from a quantitative survey of German banks at three points in time (2015, 2017 and 2019), we analyze the impact of changes in the interest rate level on banks’ net interest income and the countermeasures they take. A decline in the interest rate level has a more negative impact on...

Using data from a quantitative survey of German banks at three points in time (2015, 2017 and 2019), we analyze the impact of changes in the interest rate level on banks' net interest income and the countermeasures they take. A decline in the interest rate level has a more negative impact on net...

We decompose the change in banks' net interest margin into a change in market-wide bank rates and a change in the balance-sheet composition. Our empirical findings from a detailed data set on German banks' balance-sheet positions, broken down into different maturities, creditors and borrowers...

Using unique data sets on German banks, we decompose their net interest margin and quantify the different components by estimating the costs of the various functions they perform. We investigate three major functions: namely, liquidity and payment management for the customers, the bearing of...

We investigate German banks' exposure to interest rate risk. In finance, higher demand for a risky asset is typically associated with higher expected return. However, employing a utility function which implies both risk-averse and risk-seeking behavior depending on the level of profits, we show...