Classifying loans as fixed-rate or floating-rate fails to fully capture their distinct sensitivity to changes in ECB policy rates. This column analyses the maturity of the relevant risk-free rates used to price new loans to see if it affects their short-term interest rate sensitivity. In countries where new loans were priced using shorter-term risk-free rates, interest rates increased more sharply during the ECB’s monetary tightening, regardless of the loan’s own maturity. Banks partly offset this rise by lowering the premia they charged. This highlights how variations in lending practices drive cross-country ... (full story)