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Maturity Transformation and Interest Rate Risk in Large European Bank Loan Portfolios

Author

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  • Galen Sher
  • Giuseppe Loiacono

Abstract

Rationale and objective: The objective of this paper is to define the term "Maturity Transformation" and to measure the amount of interest rate risk arising from maturity transformation to which large European banks are exposed. Modeling approach and methodology: We collect balance sheet asset and liability data by maturity for the largest European banks, in more detail than is available from the major data providers. To these asset and liability exposures, we apply several methods for measuring interest rate repricing risk based on asset pricing models, including the latest Basel Committee guidelines. Preliminary/expected results: We are able to rank the banks in our sample based on measures of the interest rate risk of their loan portfolios using publicly available information. These risk measures are crucial for understanding the overall interest rate risk of banks, and for allowing supervisors, investors and customers to hold these institutions to account.

Suggested Citation

  • Galen Sher & Giuseppe Loiacono, 2013. "Maturity Transformation and Interest Rate Risk in Large European Bank Loan Portfolios," EcoMod2013 5442, EcoMod.
    • Handle: RePEc:ekd:004912:5442
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    References listed on IDEAS

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    Keywords

    European Union; Finance; Microsimulation;
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