Developments in risk-transfer instruments and risk management techniques in the last two decades have fundamentally changed how banks manage their assets and liabilities. In this document we show that, for all three sectors of German universal banks (private commercial banks, savings banks, and...

Section 340f of the German Commercial Code allows banks to provision against the special risks inherent to the banking business by building hidden reserves. Beyond risk provisioning, these reserves are implicitly accepted as an earnings management device. By analyzing financial statements of...

We use a unique dataset of German banks’ exposure to interest rate risk to derive the following statements about their exposure to this risk and their earnings from term transformation. The systematic factor for the exposure to interest rate risk moves in sync with the shape of the term...

We decompose the change in banks' net interest margin into a change in market-wide bank rates and a change in the balance-sheet composition. Our empirical findings from a detailed data set on German banks' balance-sheet positions, broken down into different maturities, creditors and borrowers...

We use portfolios of passive investment strategies to replicate the interest risk of banks’ banking books. The following empirical statements are derived: (i) Changes in banks’ present value and in their net interest income are highly correlated, irrespective of the banks’ portfolio...

Relationship lending is a common practice in credit financing all over the world, particularly in Germany. On the basis of a comprehensive data set comprising information on firm-bank relationships for more than 16,000 observations, this study analyses the determinants of relationship lending in...