Abstract
This paper determines if the maturity structure of commercial banks’ asset portfolios changed as a result of the financial crisis of the late 2000s and whether any changes in the portfolios may be homogeneous across bank size. A proxy for the maturity of rate-sensitive assets is constructed, and it is found that significant changes did begin to occur during the third quarter of 2008. The maturity structure of assets of relatively small banks gradually began to increase before leveling off six years later. The maturity of larger bank asset portfolios had been falling and continued to decrease for three more years, until reversing during the 3rd quarter of 2011. Large banks also have significantly shorter-term portfolios compared to their smaller counterparts, which tend to be very similar regardless of their small size. The composition of banks’ asset portfolios is also examined with some notable differences among banks of different size.
Highlights
This paper determines if the maturity structure of commercial banks’ asset portfolios changed as a result of the financial crisis of the late 2000s and whether any changes in the portfolios may be homogeneous across bank size
This paper uses freely available U.S bank data to determine if commercial banks allocated their assets differently after the financial crisis of the late 2000s and if any changes were affected by the size of an institution
Residential loans and some debt securities are negatively related to bank size, while mortgage-backed securities and collateralized mortgage obligations have a positive relation to bank size
Summary
A typical U.S commercial bank holds a wide variety of interest sensitive loans and securities, which may comprise between 75 and 85 percent of all assets. The structure of these assets is a crucial element of asset and liability management strategies of the institutions and their ability to withstand routine changes in interest rates and economic shocks. The distribution of rate-sensitive assets for banks of different size groups is examined. It is found that there were changes in the distribution of assets after 2008, there is no consistent pattern based on the size of the institution. The proxy is used to test if the maturity of the asset portfolio changed as a result of the financial crisis. Small banks follow similar asset distribution strategies, after the financial crisis
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