IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/32724.html
   My bibliography  Save this paper

Is Maturity-Transformation Risk Priced into Bank Deposit Rates?

Author

Listed:
  • Matthias Fleckenstein
  • Francis A. Longstaff

Abstract

We use the term structure of bank CD rates to examine whether maturity-transformation risk is priced into the rates banks offer customers. We find that depositors pay a significant cost for the liquidity provided by bank deposits. This cost is strongly related to the amount of maturity-transformation risk that these deposit accounts create. The cost is also negatively correlated with the convenience premia in Treasury markets, which suggests that households do not view deposit liquidity and Treasury liquidity as perfect substitutes. The results have important implications about the role of deposit franchises and market power in banking markets.

Suggested Citation

  • Matthias Fleckenstein & Francis A. Longstaff, 2024. "Is Maturity-Transformation Risk Priced into Bank Deposit Rates?," NBER Working Papers 32724, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32724
    Note: AP
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w32724.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:32724. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.