Licencia Creative Commons

Tuesday, October 10, 2023

COBERTURA LIMITADA Y APUESTA POR LA RESURRECCIÓN DE LOS BANCOS USA DURANTE LA SUBIDA DE TIPOS EN 2022

 


Erica Xuewei Jiang

University of Southern California

Gregor Matvos

Northwestern University - Kellogg School of Management

Tomasz Piskorski

Columbia University - Columbia Business School, Finance

Amit Seru

Stanford University

Erica Xuewei Jiang University of Southern California 

Gregor Matvos Northwestern University - Kellogg School of Management Tomasz Piskorski Columbia University -Columbia Business School, Finance 

Amit Seru Stanford University 

 Date Written: April 3, 2023 


Abstract

We analyze the extent to which U.S. banks hedged their asset exposure as the monetary policy tightened in 2022. We use call reports data for interest rate swaps covering close to 95% of all bank assets and supplement it with hand-collected data on broader hedging activity from 10K and 10Q filings for all publicly traded banks (68% of all bank assets). Interest rate swap use is concentrated among larger banks who hedge a small amount of their assets. Over three quarters of all reporting banks report no material use of interest rate swaps. Swap users represent about three quarters of all bank assets, but on average hedge only 4% of their assets and about one quarter of their securities. Only 6% of aggregate assets in the U.S. banking system are hedged by interest rate swaps. We also find limited hedging of interest rate exposure by publicly traded banks and by banks which report the duration of their assets. The use of hedging and other interest rate derivatives was not large enough to offset a significant share of the $2.2 trillion loss in the value of U.S. banks’ assets (Jiang et al. 2023). The duration of bank assets increased during 2022, exposing banks to additional interest rate risk. We find slightly less hedging for banks whose assets were most exposed to interest rate risk. Banks with the most fragile funding – i.e., those with highest uninsured leverage -- sold or reduced their hedges during the monetary tightening. This allowed them to record accounting profits but exposed them to further rate increases. These actions are reminiscent of classic gambling for resurrection: if interest rates had decreased, equity would have reaped the profits, but if rates increased, then debtors and the FDIC would absorb the losses. 

 

 

 

 

No comments: