Banks' net interest margin and changes in the term structure

Christoph Memmel and Lotta Heckmann-Draisbach

No 11/2023, Discussion Papers from Deutsche Bundesbank

Abstract: Understanding the impact of changing interest rates onto banks' net interest margin is of central importance for various stakeholders. The primary focus lies often on changes in the interest level. However, changes in the steepness are a second driver which also significantly impacts banks' interest business. We model the impact of an interest rate shock on a bank's net interest margin, where this shock consists not only of a level shift, but also of a change in the steepness of the term structure. Our simplified model can replicate stylized features of different bank business models.The outcome of our parsimonious model for a bank's interest business is broadly in line with the results of a quantitative survey among German small and medium-sized banks.

Keywords: Banks' net interest margin; Term Structure of Interest Rates (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/273723/1/2023-03-31-dkp-11-data.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:112023

Access Statistics for this paper

More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().