Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/52133
Authors: 
Memmel, Christoph
Schertler, Andrea
Year of Publication: 
2011
Series/Report no.: 
Discussion Paper Series 2: Banking and Financial Studies 2011,13
Abstract: 
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 and degrees of liquidity are as follows: (i) Changes in bank rates have a much greater impact on and explain more of the variation in net interest margins than do changes in balance-sheet compositions. (ii) Changes in bank rates and changes in balance-sheet compositions affect the change in the net interest margin less strongly for derivative users than for non-users. On average, banks employ interest rate derivatives to reduce on-balance risk. (iii) When risk-taking becomes more lucrative, banks tend to increase their on-balance exposure. This effect is more pronounced for derivative users than for non-users.
Subjects: 
net interest margin
banking
balance-sheet composition
JEL: 
G21
ISBN: 
978-3-86558-753-4
Document Type: 
Working Paper

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