Retail bank interest rate internal regulation
- Authors: Babikov V.G.1, Babikov O.V.2
-
Affiliations:
- V.A. Trapeznikov Institute of Control Sciences of RAS
- Moscow Institute of Physics and Technology
- Issue: No 109 (2024)
- Pages: 122-135
- Section: Control of social-economic systems
- URL: https://journals.rcsi.science/1819-2440/article/view/284367
- DOI: https://doi.org/10.25728/ubs.2024.109.6
- ID: 284367
Cite item
Full Text
Abstract
Retail bank client’s behavior investigation allows us to obtain some necessary patterns for the balanced interest rates distribution model development. In order to study the behavior of retail bank clients and for the balanced interest rates distribution model developing, two types of financial instruments were studied: current accounts, deposits. The main result of this paper is the optimal ratio of current account interest rates establishing at given interest rates on deposits (in conditions of exact future market interest rates expectations). The approach outlined in the article offers banks a convenient, versatile, and easily understandable method for elaborating an optimal strategy to manage financial instruments. Key input parameters for decision-making in interest rate setting encompass the behavioral attributes of clients and the anticipations of bank management concerning future interest rate trends. In practical application, this approach leads to substantial cost reductions for banks, potentially yielding savings of up to 10--15 \% of their current funding expenses.
Keywords
About the authors
Vladimir Georgievich Babikov
V.A. Trapeznikov Institute of Control Sciences of RAS
Email: babikov@ipu.ru
Moscow
Oleg Vladimirovich Babikov
Moscow Institute of Physics and Technology
Email: babikov.ov@phystech.edu
Moscow
References
- КЕНДАЛЛ М.ДЖ., СТЬЮАРТ А. Теория распределений. –М.: Изд-во «Наука», 1966.
- ТЮРИН Ю.Н Непараметрические методы статистики. –М.: Изд-во «Знание», 1978.
- ХАСТИНГС Н., ПИКОК ДЖ. Справочник по статистиче-ским распределениям. – М.: Изд-во «Статистика», 1980.
- DE BONDT G. Interest rate pass-through. Empirical resultsfor the euro area // German Economic Review. – 2005. –Vol. 6(1). – P. 37–78.
- DIAMOND D.W., DYBVIG P.H. Bank runs, deposit insurance,and liquidity // Journal of Political Economy. – 1983. –Vol. 91(3). – P. 401–419.
- FECHT F., MARTIN A. Banks, markets, and efficiency //Annals of Finance. – 2009. – Vol. 5(2). – P. 131–160.
- HAKANSSON G., ZIEMBA W.T. Capital growth theory //In: Jarrow R.A., Maksimovic V., Ziemba W.T. (eds.): FinanceHandbook. – North-Holland, Amsterdam, 1995.
- HANNAN T.H., BERGER A.N. The rigidity of prices. Evidencefrom the banking industry // The American Economic Review. –1991. – Vol. 81(4). – P. 938–945.
- ILLES A., LOMBARDI M. Interest rate pass-through since thefinancial crises // BIS Quarterly Review. – 2013. – P. 57–66.
- KUTAN A.M., OZSOZ E., RENGIFO E.W. Cross-Sectional Determinants of Bank Performance under DepositDollarization in Emerging Markets // Emerging MarketsReview. – 2012. – Vol. 13(4). – P. 478–492.
- Oesterreichische Nationalbank and FinanzmarktaufsichtOsterreich 2008. Leitfaden zum Management des Zinsrisikosim Bankbuch.
- ROLFES B., BANNERT T. Die Kalkulation variabelverzinslicher Bankgeschafte: Handbuch Bankcontrolling / Eds.:Schierenbeck H., Rolfes B. – 2001. – P. 281–299.
- ROUSSEAS S. A Markup Theory of Bank Loan Rates // Journalof Post Keynesian Economics. – 1985. – Vol. 8, Iss. 1. –P. 135–144.
- SALOP S. Monopolistic competition with outside goods //Journal of Economics. – 1979. – Vol. 10(1). – P. 141–156.
- SIUDEK T., ZAWOJSKA A. Optimal Deposit and LoanInterest Rates Setting in Co-Operative Banks // ActaScientiarum Polonorum. Oeconomia. – 2015. – Vol. 14(3). –Vol. 117–134.
- SOPP H. Interest rate pass-through to the rates of core depositsa new perspective. Discussion Paper // Deutsche Bundesbank. –2018. – Vol. 25.
Supplementary files
