Banks and negative interest rates

Arbeitspapier

In this paper, we survey the nascent literature on the transmission of negative policy rates. We discuss the theory of how the transmission depends on bank balance sheets, and how this changes once policy rates become negative. We review the growing evidence that negative policy rates are special because the pass-through to banks' retail deposit rates is hindered by a zero lower bound. We summarize existing work on the impact of negative rates on banks' lending and securities portfolios, and the consequences for the real economy. Finally, we discuss the role of different "initial" conditions when the policy rate becomes negative, and potential interactions between negative policy rates and other unconventional monetary policies.

Object Details

• ISBN: 978-92-899-4549-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2549

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Monetary Policy ; Central Banks and Their Policies ; Financial Institutions and Services: General ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: deposits ; negative interest rates ; zero lower bound ; bank lending ; bank risktaking ; euro-area heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Heider, Florian ; Saidi, Farzad ; Schepens, Glenn
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2021

Further information

• DOI: doi:10.2866/660257
• Handle: http://hdl.handle.net/10419/237688
• Last update: 10.03.2025, 11:44 AM CET