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Smaller Banks Less Able to Withstand Flattening Yield Curve

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  • Pavel Kapinos
  • Alex Musatov

Abstract

For the overall U.S. banking system, the effect on profitability of yield-curve flattening?the lowering of the difference between the yields of short- and long-term debt?lasts about a year and is relatively small. After the first year, the impact on large banks? profitability becomes positive; for smaller institutions, it stays negative and becomes larger. Recent yield-curve flattening is likely to more strongly affect smaller banks, reducing their profitability.

Suggested Citation

  • Pavel Kapinos & Alex Musatov, 2018. "Smaller Banks Less Able to Withstand Flattening Yield Curve," Economic Letter, Federal Reserve Bank of Dallas, vol. 13(8), pages 1-4, June.
    • Handle: RePEc:fip:feddel:00063
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    Cited by:

    1. B. De Backer & M. Deroose & Ch. Van Nieuwenhuyze, 2019. "Is a recession imminent? The signal of the yield curve," Economic Review, National Bank of Belgium, issue i, pages 69-93, June.

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