Arbeitspapier
Implications of negative interest rates for the net interest margin and lending of euro area banks
This paper explores the impact of low (but) positive and negative market interest rates on euro area banks' net interest margin (NIM) and its components, retail lending and retail deposit rates. Using two proprietary bank-level data sets, I find a positive impact of the level of the short-term rate on the NIM, which increases substantially at negative market rates. As low profitability could hamper the ability of banks to expand lending, I also investigate the impact of the NIM on new lending to the non-financial private sector. In general, the NIM is positively related to lending: When lending is less profitable, banks cut lending. However, at negative rates this effect vanishes. This finding suggests that banks adjusted their business practices when servicing new loans, thereby contributing to higher new lending in the euro area since 2014.
- ISBN
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978-3-95729-679-5
- Language
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Englisch
- Bibliographic citation
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Series: Deutsche Bundesbank Discussion Paper ; No. 10/2020
- Classification
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Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
- Subject
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net interest margin
monetary policy
negative interest rates
bank profitability
lending
- Event
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Geistige Schöpfung
- (who)
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Klein, Melanie
- Event
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Veröffentlichung
- (who)
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Deutsche Bundesbank
- (where)
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Frankfurt a. M.
- (when)
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2020
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Klein, Melanie
- Deutsche Bundesbank
Time of origin
- 2020
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