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

Without access to basic financial services, Africans are at risk of remaining at the margins of economic opportunity with little hope of realizing their tremendous creative potential. In the past, most poor Africans relied on home- grown, often unreliable and exploitative traditional services in the form of deposit collectors and moneylenders. Now microfinance is a big part of the picture. Increasingly, more structured, flexible VSLAs are beginning to proliferate, and microfinance institutions that offer more diverse and sophisticated financial services to the poor are reaching more and more people. Financial services, and all that they portend for increased economic security, prosperity. | DEUTSCHE BUNDESBANK EUROSYSTEM Banks exposure to interest rate risk their earnings from term transformation and the dynamics of the term structure Christoph Memmel Discussion Paper Series 2 Banking and Financial Studies No 07 2010 Discussion Papers represent the authors personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank or its staff. Editorial Board Klaus Dullmann Frank Heid Heinz Herrmann Karl-Heinz Todter Deutsche Bundesbank Wilhelm-Epstein-Strabe 14 60431 Frankfurt am Main Postfach 10 06 02 60006 Frankfurt am Main Tel 49 69 9566-0 Telex within Germany 41227 telex from abroad 414431 Please address all orders in writing to Deutsche Bundesbank Press and Public Relations Division at the above address or via fax 49 69 9566-3077 Internet http Reproduction permitted only if source is stated. ISBN 978-3-86558-644-5 Printversion ISBN 978-3-86558-645-2 Internetversion 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 JEL classification G11 .