Which interest rate scenario is the worst one for a bank? Evidence from a tracking bank approach for German savings and cooperative banks
AbstractInterest income is the most important source of revenue for most of the banks. The aim of this paper is to assess the impact of different interest rate scenarios on the banks' interest income. As we do not know the interest rate sensitivity of real banks, we construct for each bank a portfolio with a similar composition of its assets and liabilities, called 'tracking bank'. We evaluate the effect of 260 historical interest rate shocks on the tracking banks of German savings banks and cooperative banks. It turns out that a sharp decrease in the steepness of the yield curve has the most negative impact on the banks' interest income. -- Der Zinsüberschuss ist für die meisten Banken die wichtigste Ertragsquelle. Stresstests in Bezug auf den Zinsüberschuss sind daher von wesentlicher Bedeutung. Die einzelnen Banken können solche Stresstests relativ einfach durchführen, weil ihnen die notwendigen Informationen (zukünftige Zahlungsströme und die Laufzeitstruktur der Forderungen und Verbindlichkeiten) vorliegen. Au?enstehende dagegen müssen die Laufzeitstruktur der Forderungen und Verbindlichkeiten auf Grundlage von Aktienkursänderungen oder Jahresabschlüssen schätzen.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2008,07.
Date of creation: 2008
Date of revision:
Interest Rate Risk; Stress Testing;
Other versions of this item:
- Christoph Memmel, 2008. "Which interest rate scenario is the worst one for a bank? Evidence from a tracking bank approach for German savings and cooperative banks," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 1(1), pages 85-104.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October.
- Diebold, Francis X. & Li, Canlin, 2003.
"Forecasting the term structure of government bond yields,"
CFS Working Paper Series
2004/09, Center for Financial Studies (CFS).
- Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, vol. 130(2), pages 337-364, February.
- Francis X. Diebold & Canlin Li, 2003. "Forecasting the Term Structure of Government Bond Yields," NBER Working Papers 10048, National Bureau of Economic Research, Inc.
- Francis X. Diebold & Canlin Li, 2002. "Forecasting the Term Structure of Government Bond Yields," Center for Financial Institutions Working Papers 02-34, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Wilkens, Marco & Memmel, Christoph & Entrop, Oliver & Zeisler, Alexander, 2008. "Analyzing the interest rate risk of banks using time series of accounting-based data: evidence from Germany," Discussion Paper Series 2: Banking and Financial Studies 2008,01, Deutsche Bundesbank, Research Centre.
- Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
- James M. O'Brien, 2000. "Estimating the value and interest rate risk of interest-bearing transactions deposits," Finance and Economics Discussion Series 2000-53, Board of Governors of the Federal Reserve System (U.S.).
- Hausman, Jerry A, 1978.
"Specification Tests in Econometrics,"
Econometric Society, vol. 46(6), pages 1251-71, November.
- Sharpe, William F., 1967. "Portfolio Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 2(02), pages 76-84, June.
- Jan Willem van den End & Marco Hoeberichts & Mostafa Tabbae, 2006. "Modelling Scenario Analysis and Macro Stress-testing," DNB Working Papers 119, Netherlands Central Bank, Research Department.
- Ruprecht, Benedikt & Entrop, Oliver & Kick, Thomas & Wilkens, Marco, 2013. "Market timing, maturity mismatch, and risk management: Evidence from the banking industry," Discussion Papers 56/2013, Deutsche Bundesbank, Research Centre.
- Ruprecht, Benedikt & Entrop, Oliver & Kick, Thomas & Wilkens, Marco, 2013. "Market Timing, Maturity Mismatch, and Risk Management: Evidence from the Banking Industry," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79733, Verein für Socialpolitik / German Economic Association.
- Memmel, Christoph, 2011.
"Banks' exposure to interest rate risk, their earnings from term transformation, and the dynamics of the term structure,"
Journal of Banking & Finance,
Elsevier, vol. 35(2), pages 282-289, February.
- Memmel, Christoph, 2010. "Banks' exposure to interest rate risk, their earnings from term transformation, and the dynamics of the term structure," Discussion Paper Series 2: Banking and Financial Studies 2010,07, Deutsche Bundesbank, Research Centre.
- Memmel, Christoph & Schertler, Andrea, 2011. "Banks' management of the net interest margin: Evidence from Germany," Discussion Paper Series 2: Banking and Financial Studies 2011,13, Deutsche Bundesbank, Research Centre.
- Entrop, Oliver & Memmel, Christoph & Ruprecht, Benedikt & Wilkens, Marco, 2012. "Determinants of bank interest margins: Impact of maturity transformation," Discussion Papers 17/2012, Deutsche Bundesbank, Research Centre.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.