The phase of low interest rates in recent years has posed challenges for many banks. In particular, banks with high deposit volumes aligned to traditional deposit models have suffered from creeping margin compression. In our white paper “Deposit modelling in a low-interest environment”, we analyse the weaknesses of these deposit models and explain how banks can take a better approach in the future.
The swaption-based approach
This white paper presents the strategy of a rolling portfolio of swaptions. With this approach developed by Sparkasse Köln-Bonn, margin compression effects can be reduced in the deposit models. Income statements can also be stabilised in phases of continuously low or steadily falling interest rates. Using examples, we explain in detail how this strategy can be used in the future to stabilise earnings before or at the start of a new phase of low interest rates.
