No. 752 - Interdependence between assets and liabilities in the banking system: changes in the last two decades

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by Valentina Michelangeli and Fabio Massimo PiersantiMarch 2023

The paper analyses the changing relationships between asset and liability items on the balance sheet of Italian banks between 2003 and 2020, distinguishing between larger, smaller and cooperative credit banks (BCCs). We constructed an interdependence index that, by exploiting the balance sheet information available on a monthly basis, is able to track the evolution of these linkages for the three classes of banks mentioned.

Between 2003 and 2020, the interdependence between bank assets and liabilities diminished for all the bank classes examined. This reflected, in particular, the abundant liquidity made available by the monetary policy operations introduced in response to the sovereign debt crisis, the protracted low interest rate environment, and the 2012 fiscal reform, which raised the taxation of bank bond yields for retail investors.