We investigate German banks' exposure to interest rate risk. In finance, higher demand for a risky asset is typically associated with higher expected return. However, employing a utility function which implies both risk-averse and risk-seeking behavior depending on the level of profits, we show...

An increase in the level of interest rates is said to have a negative impact on banks’ net interest margins in the short run. Using a time series of more than 40 years for the German banking system, we show that the opposite effect exists in the long run, where an increase in the level of...

The Value at Risk of a portfolio differs from the sum of the Values at Risk of the portfolio’s components. In this paper, we analyze the problem of how a single economic risk figure for the Value at Risk of a hypothetical portfolio composed of different commercial banks might be obtained for a...

Using detailed data of all German banks, we find that banks which have suffered heavy credit losses reduce their corporate lending business by 1.32 euro for each euro lost; with 95% confidence, the effect is between 0.85 and 1.80 euros. This sensitivity is in line with (quite heterogeneous)...

Using granular data of German banks for the 2003 to 2018 period, we analyse the determinants of bank rates on retail deposits. We find that a bank's rate on sight deposits is especially low if the bank operates in rural districts, if it is not exposed to strong competition and if it provides...