Smaller Banks Less Able to Withstand Flattening Yield Curve

4 Pages Posted: 13 Jul 2018 Last revised: 29 Apr 2020

See all articles by Pavel S. Kapinos

Pavel S. Kapinos

Federal Reserve Bank of Dallas--Financial Industry Studies

Alex Musatov

Federal Reserve Banks - Federal Reserve Bank of Dallas

Date Written: 2018

Abstract

For the overall U.S. banking system, the effect on profitability of yield-curve flattening—the lowering of the difference between the yields of short- and long-term debt—lasts about a year and is relatively small. After the first year, the impact on large banks’ profitability becomes positive; for smaller institutions, it stays negative and becomes larger. Recent yield-curve flattening is likely to more strongly affect smaller banks, reducing their profitability.

Suggested Citation

Kapinos, Pavel S. and Musatov, Alex, Smaller Banks Less Able to Withstand Flattening Yield Curve (2018). Economic Letter, Vol. 13, Issue 8, pp. 1-4, 2018, Available at SSRN: https://ssrn.com/abstract=3211866

Pavel S. Kapinos (Contact Author)

Federal Reserve Bank of Dallas--Financial Industry Studies ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

HOME PAGE: http://https://sites.google.com/site/pavelkapinos/

Alex Musatov

Federal Reserve Banks - Federal Reserve Bank of Dallas

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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