Fixed-Rate Lending and Interest Rate Futures Hedging

Article Abstract:

Since the establishment of the floating interest rate, borrowers and lenders have sought a way to hedge changes in the interest rate to stabilize the costs of loans. Interest rate futures have provided this hedge. Increasingly banks are turning to the use of these futures to proved fixed rate loans for their customers and to convert floating rate liabilities into fixed rate liabilities which can provide funds for further lending. A study was undertaken to examine the use of interest rate futures in fixed-rate lending. Results show that interest rate futures improved the interest rate risk associated with rate rollovers. However, the cost of the fixed rate loaj when matched with fixed rate liabilities of the same maturity is less than the futures hedge. In addition, with fixed rate matching there is no risk, while the hedged roll-over rate still had variability. The futures hedging offers the advantages of flexibility and the ability they give banks to match liabilities with assets.

Evaluation, Hedging (Finance), Interest rates

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Profitability of small-business lending

Article Abstract:

Large and small business bank loan profitability was studied because of concerns over the ability of small businesses to access first-level credit financing. The site where the research was carried out was a metropolitan-based lead bank of a large bank holding company in the Sunbelt, using accounting relationships from a three-year period of the bank's income statements. The study found that small business loans cost more to administer and involve more risk than large business loans; that the higher interest rates which small business loans carry are not enough to make up for the risks and costs; but that the small business loans are actually more profitable because of the extra money the bank makes on the larger customer deposits.

Research, Finance, Small business, Bank loans

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A Manpower Sizing and Resource Allocation Model for Commercial Lending

Article Abstract:

Commercial loans often represent an important source of bank revenue. Competition has increased in the various commercial loan markets. A periodic market review is needed. A model is given that helps target staff size, determine markets, allocate staff among markets and forecast revenues and income. Figures and an illustration of its use are included.

Models, Marketing

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