Banks and Financial Intermediation

• Refinancing and Deposit Management
• Risk Management and Business Models of Financial Institutions
• Bank Lending and its Impact on the Real Economy
• Expectation Formation in Financial Markets  

The research area “Banks and Financial Intermediation” examines the role and behaviour of institutional players such as banks, insurance companies and financial advisors under changing market conditions. Demographic change, digitalisation and climate change are expected to lead to sustained changes in market rates (low interest rate environment), monetary policy and the structure of the financial system. In this context, important research questions need to be addressed: How will the new conditions impact banks’ business models, their lending and financing? Which effects will this, in turn, have on the real economy in general and households in particular? And what are the implications for the regulation of different financial institutions and markets?

The research area also conducts the ZEW Financial Market Survey. Financial market experts are asked monthly about their expectations regarding future trends in economic activity, inflation rates, short-term and long-term interest rates, share prices and exchange rates. The experts’ expectations on the future economic development in Germany serve as a basis for calculating the ZEW Indicator of Economic Sentiment. This leading indicator for the economic trend (ZEW Index) is followed closely by the public. The data are a unique basis for empirically testing different financial market models. Apart from that, the data allow for verifying and improving methods to quantify qualitative expectations.

This research area is closely linked to the “Household Finance” research area. Joint assessments will contribute to a comprehensive understanding of demand and supply effects within the financial sector that are driven by demographic change, digitalisation and climate change. This comprehensive view will facilitate the deduction of evidence-based policy recommendations for the design of institutions and markets.