Banks' Maturity Transformation: Risk, Reward, and Policy
ISBN: 9781484346716
Platform/Publisher: Ebook Central / International Monetary Fund
Digital rights: Users: Unlimited; Printing: Limited; Download: 7 Days at a Time
Subjects: Business/ Management;

The aim of this paper is twofold: first, to study the determinants of banks' net interest margin with a particular focus on the role of maturity transformation, using a new measure of maturity mismatch; second, to analyse the implications for banks from the relaxation of a binding prudential limit on maturity mismatch, in place in Italy until mid-2000s. The results show that maturity transformation is a relevant driver of the net interest margin, as higher maturity transformation is typically associated with higher net interest margin. However, 'excessive' maturity transformation-- even without leading to systemic vulnerabilities-- increases banks' interest rate risk exposure and lowers their net interest margin.


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