Working Paper: CEPR ID: DP5027
Authors: Lars Norden; Martin Weber
Abstract: This paper examines funding modes of German banks and its implications for lending and profitability over the period 1992-2002. Analysing individual bank data from the Deutsche Bundesbank, we first find that deposits from customers lose ground in relative terms while interbank liabilities increase as a source of funding. Second, we cannot detect a negative impact of the relative decline in deposits on the lending business. In contrast, loans to customers become even slightly more important. Third, the decreasing ability of banks to mobilize deposits from customers and the substitution of deposits by interbank liabilities unfavourably affects the net interest results of savings banks.
Keywords: banks; deposit taking; disintermediation; panel analysis
JEL Codes: G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in customer deposits (G21) | Increase in interbank liabilities (F65) |
| Decline in customer deposits (G21) | Decrease in net interest income (E43) |
| Increase in interbank liabilities (F65) | Decrease in net interest income (E43) |
| Deposits from customers (G21) | Loans to customers (G21) |