Banking on Deposits: Maturity Transformation without Interest Rate Risk

We show that maturity transformation does not expose banks to interest rate risk—it hedges it. The reason is the deposit franchise, which allows banks to pay deposit rates that are low and insensitive to market interest rates. Hedging the deposit franchise requires banks to earn income that is also...

Full description

Saved in:

Bibliographic Details
Published in:	The Journal of finance (New York) Vol. 76; no. 3; pp. 1091 - 1143
Main Authors:	DRECHSLER, ITAMAR, SAVOV, ALEXI, SCHNABL, PHILIPP
Format:	Journal Article
Language:	English
Published:	Cambridge Wiley Periodicals LLC 01.06.2021 Wiley Subscription Services, Inc Blackwell Publishers Inc
Subjects:	Bank deposits Bank earnings Banking Business schools Financial disclosure Franchises Hedges Hedging Hedging (Finance) Income Interest income Interest rate risk Interest rates Macroeconomics Maturity Monetary policy Seminars Transformation
ISSN:	0022-1082, 1540-6261
Online Access:	Get full text
Tags:	Add Tag No Tags, Be the first to tag this record!

Be the first to leave a comment!