„Window-dressing“ in Bankbilanzen

Abstract

Window-dressing in Bank Balance Sheets

Window-dressing is the term used for the long-established practice of banks of influencing the amounts shown for certain items in their balance sheets by measures undertaken specifically to “doctor” balance sheets and hence geared to key-dates. In the narrower sense, window-dressing means manipulation of credit balances with the central bank motivated by balance-sheet policy. The cause of this window-dressing is the desire of the banks to present that section of the public which is interested in their balance sheets with as favourable a picture as possible of their liquidity. Moreover, window-dressing may have the effect of raising the balance-sheet total and hence induce “growth”, and may also contribute towards stabilization of the curves showing development of central bank credit balances and balance-sheet totals over the course of several years. Window-dressing is derived directly from the business policy objective of status sustainment. This article subjects the window-dressing hypothesis to an empirical test, using the annual statements of banks in the Federal Republic of Germany since 1963. For this study, not only the strategies practiced by the banks in the course of the month to fulfil their minimum reserve obligations were analysed, but also the interest rates paid on the money market on the balance-sheet keydate. When the banks are considered as a whole, it proves that at the end of the year they have comparatively high credit balances with the central bank, which can only be explained by the window-dressing hypothesis. A study of the most important five groups of banks further showed that four of them indulge in more or less marked window-dressing. Only the savings banks refrain from window-dressing.