Arbeitspapier

Banks' net interest margin and changes in the term structure

to connected objects

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.

ISBN: 978-3-95729-942-0

Language: Englisch

Bibliographic citation: Series: Deutsche Bundesbank Discussion Paper ; No. 11/2023

Classification: Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages

Subject: Banks' net interest margin
Term Structure of Interest Rates

Event: Geistige Schöpfung

(who): Memmel, Christoph
Heckmann-Draisbach, Lotta

Event: Veröffentlichung

(who): Deutsche Bundesbank

(where): Frankfurt a. M.

(when): 2023

Handle: http://hdl.handle.net/10419/273723

Last update: 10.03.2025, 11:42 AM CET

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Object type

Arbeitspapier

Associated

Memmel, Christoph
Heckmann-Draisbach, Lotta
Deutsche Bundesbank

Time of origin

2023

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Changes in the euro area interest rate pass-through

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Implications of negative interest rates for the net interest margin and lending of euro area banks

Arbeitspapier

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Quantifying the components of the banks' net interest margin

Arbeitspapier

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Banks' management of the net interest margin: Evidence from Germany

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Banks' management of the net interest margin: Evidence from Germany

How correlated are changes in banks' net interest income and in their present value?

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How correlated are changes in banks' net interest income and in their present value?

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Market reaction to changes in German official interest rates

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