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Which interest rate scenario is the worst one for a bank? Evidence from a tracking bank approach for German savings and cooperative banks

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Author Info
Memmel, Christoph

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Abstract

Interest 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.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2008,07.

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Date of creation: 2008
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Handle: RePEc:zbw:bubdp2:7317

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Related research
Keywords: Interest Rate Risk; Stress Testing;

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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References listed on IDEAS
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.:
  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!]
  3. 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. [Downloadable!] (restricted)
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  4. 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. [Downloadable!]
  5. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  6. 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.). [Downloadable!]
  7. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October. [Downloadable!] (restricted)
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