Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183358
Authors: 
Hoffmann, Peter
Langfield, Sam
Pierobon, Federico
Vuillemey, Guillaume
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2176
Abstract: 
We study the allocation of interest rate risk within the European banking sector using novel data. Banks' exposure to interest rate risk is small on aggregate, but heterogeneous in the cross-section. In contrast to conventional wisdom, net worth is increasing in interest rates for approximately half of the institutions in our sample. Cross-sectional variation in banks' exposures is driven by cross-country differences in loan-rate fixation conventions for mortgages. Banks use derivatives to partially hedge on-balance sheet exposures. Residual exposures imply that changes in interest rates have redistributive effects within the banking sector.
Subjects: 
interest rate risk
banking
risk management
hedging
JEL: 
G21
E43
E44
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3281-3
Document Type: 
Working Paper
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