The Effect Of Maturity Mismach On Interest Rate Margin Of Commerciai Banks

Maturity mismatch refers to “short-term funding sources,long-term use of funds”,that is “short-term capital for long-term loan”,this is a universal situation in the banking sector.In the early literature research,the maturity mismatch of banks is considered to be beneficial,the bank promote long-term investment and achieve a reasonable allocation of funds through the maturity mismatch;however,excessive maturity mismatch will make the banks face certain risks;after the "shortage of money" incident occurred,the maturity mismatch characteristics of banks attracted the attention of the people,again.Therefore,under the backdrop of marketization of interest rate in our country,this paper explore the effect mechanism of the maturity mismatch on bank spreads,from the perspective of interest rate risk exposure,and then analyze whether the bank have the tendency of interest rate risk accumulation caused by maturity mismatch.This paper draws lessons from Entrop et al(2015)extended dealer model and deduces the effect mechanism of maturity mismatch on bank spreads.According to the conclusion of the extended dealer model,maturity mismatch has two kinds of effect mechanism on bank spreads:risk-compensating effect and term premium effect,the effects of these two mechanism are contrary.By the empirical test of 68 commercial banks in China during the period of 2006-2015,this paper find that the two mechanisms of the maturity mismatch on bank spreads are existing from the overall perspective of China’s commercial banks;and the risk-compensating effect plays a leading role.Besides,compared with other factors that have a significant impact on interest rate margin,the effect of maturity mismatch on interest rate margin is weaker.In this paper,the bank spread is divided into interest income margin and interest expense margin.We explore the effects of maturity mismatch on bank spreads from the asset side and debt side,respectively.Based on the empirical results,we find that the term premium effect mainly affects the bank spreads by the interest income margin and risk-compensating effect mainly affects the bank spreads by the interest expense margin.Combined with other factors affecting interest income margin and interest expense margin,we find that risk factors have no significant impact on interest expense margin,but can affect interest income margin significantly.This paper classifies the banks according to whether cross-regional operating,the empirical result shows that the effect mechanism of the maturity mismatch on bank spread is consistent with the theoretical expectation for regional bank.However,the term premium effect of maturity mismatch on bank spread is not significant,the risk-compensating effect of maturity mismatch on bank spread is significant,but the application direction is contrary to theoretical expectation.