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Cyclical Properties of Bank Margins: Small versus Large Banks

Author

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  • Borys Grochulski
  • Daniel Schwam
  • Yuzhe Zhang

Abstract

We study cyclical properties of the net interest margin (NIM) in the US banking sector in the aggregate as well as separately for small and large banks. In the aggregate and among large banks, NIM is countercyclical. Among small banks, however, NIM is procyclical. Further, we find that this result is driven by differences in the cyclical dynamics of small and large banks' funding costs rather than asset yields.

Suggested Citation

  • Borys Grochulski & Daniel Schwam & Yuzhe Zhang, 2018. "Cyclical Properties of Bank Margins: Small versus Large Banks," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 1-33.
    • Handle: RePEc:fip:fedreq:00056
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    References listed on IDEAS

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    3. Aliaga-Díaz, Roger & Olivero, María Pía, 2010. "Is there a financial accelerator in US banking?: Evidence from the cyclicality of banks' price-cost margins," Economics Letters, Elsevier, vol. 108(2), pages 167-171, August.
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    5. Loretta J. Mester, 2017. "Perspectives on the Economic Outlook and Banking Supervision and Regulation; 2017-08-02; The Community Bankers Association of Ohio Annual Convention, Cincinnati, OH," Speech 85, Federal Reserve Bank of Cleveland.
    6. Roger Aliaga‐Díaz & María Pía Olivero, 2011. "The Cyclicality Of Price‐Cost Margins In Banking: An Empirical Analysis Of Its Determinants," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 26-46, January.
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