This article examines the loan rate-setting behavior of German banks for a large variety of retail and corporate loan products. We find that a bank’s operational efficiency is priced in bank loan rates and alters interest-setting behavior. Specifically, we establish that a higher degree of...

This paper explores the extent to which interest risk exposure is priced in bank margins. Our contribution to the literature is twofold: First, we present an extended model of Ho and Saunders (1981) that explicitly captures interest rate risk and returns from maturity transformation. Banks price...

We study how a Net Stable Funding Ratio as defined by the Basel Committee in 2014 (NSFR (2014)) would affect the profitability of German banks and their capacity to lend. With a NSFR-model that is partially calibrated against reported NSFRs, we find that 9% of German banks do not comply with the...

This paper empirically investigates whether individuals withhold a certain amount of cash for precautionary reasons at the point-of-sale (POS) in order to be able to cover future transactions that might have to be paid for in cash. Such behaviour is costly for consumers because it imposes...

Extant literature consistently documents that investors tilt their domestic equity portfolios towards regionally close stocks (local bias). We hypothesize that individual investors’ local bias is not limited to the domestic sphere but instead also determines their international investment...

This paper empirically investigates the effect of interbank relationship lending on banks’ access to liquidity. Our analysis is based on German interbank payment data which we use to create a panel of unsecured overnight loans between 1079 distinct borrower-lender pairs. The data shows that...

We investigate how the lending activities of a multinational bank’s affiliates located abroad are affected by funding difficulties in view of the financial crisis. For this, we consider transaction-induced changes in long-term lending to the private sector of 40 countries by the affiliates of...