We show empirically that banks' exposure to interest rate risk, or income gap, plays a crucial role in monetary policy … transmission. In a first step, we show that banks typically retain a large exposure to interest rates that can be predicted with … income gap. Secondly, we show that income gap also predicts the sensitivity of bank lending to interest rates. Quantitatively …

Traditionally, banks and financial intermediaries borrow short and lend long. This causes a risk of negative net worth … of deposit insurance as a function of capital-asset ratio for a bank with demand liabilities and longer term, default …

We develop a framework to estimate bank franchise value. Contrary to existing models, sticky deposits and low deposit … exacerbating losses on banks' securities holdings. Banks with less responsive deposit rates tend to invest more in long …-term securities, aiming to hedge cash flows rather than market value. Despite significant recent rate hike losses, most U.S. banks …

exposure that are comparable across banks as well as across the business segments of an individual bank. We also propose a …This paper studies U.S. banks' exposure to interest rate and credit risk. We exploit the factor structure in interest … rates to represent many bank positions in terms of simple factor portfolios. This approach delivers time varying measures of …

fluctuations. More vulnerable banks were more likely to reclassify. Extending Jiang et al.'s (2023) solvency bank run model, we …In the face of rising interest rates in 2022, banks mitigated interest rate exposure of the accounting value of their … derivatives left most assets unhedged. The banks most vulnerable to asset declines and solvency runs decreased existing hedges …

Motivated by the regional bank crisis of 2023, we model the impact of interest rates on the liquidity risk of banks …. Prior work shows that banks hedge the interest rate risk of their assets with their deposit franchise: when interest rates … valuable if depositors remain in the bank. This creates run incentives for uninsured depositors. We show that a run equilibrium …

exposure in bad times. We apply this idea to bank risk measurement. We find that banks with high accounting return on equity … triggered by the collapse of Silicon Valley Bank. ROE predicts systematic tail risk much better than conventional measures based …

governments "kicked the can down the road" by providing banks with guarantees instead of full-fledged recapitalizations. We adopt … their consequences. We find that forbearance caused undercapitalized banks to shift their assets from loans to risky …, eventually, greater reliance on liquidity support from the European Central Bank …

From 2010 to 2012, the relation between bank stock returns from European Union (EU) countries and the returns on … to identify the effects of shocks to the cost of borrowing of these countries on EU banks from other countries. A CDS … tail return affects banks with greater exposure to the country experiencing that return more, but it has an impact on banks …