Arbeitspapier
Key determinants of net interest margin of EU banks in the zero lower bound of interest rates
In this paper, we analyse a relationship between net interest margin (NIM) of EU banks and market interest rates in a low-interest rate environment. We contribute to the literature when examining a large sample of annual data on 629 banks from EU member countries during the 2011-2016 period, which also covers the period of zero and negative rates. We test three hypotheses and come to the three main conclusions. First, NIM eroded during the whole observed period for all types of investigated banks. Second, a higher market concentration, proxied by the Herfindahl index, leads to higher NIM. Finally, we show a positive concave relationship of NIM with short-term interest rate observed in previous studies, which supports the suspected non-linearity in situation of zero lower bound of interest rates. Contrary to other researchers, we find a negative relationship between NIM and the yield curve slope.
- Language
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Englisch
- Bibliographic citation
-
Series: IES Working Paper ; No. 02/2019
- Classification
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Wirtschaft
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Interest Rates: Determination, Term Structure, and Effects
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Subject
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banks
net interest margin
Herfindahl index
interest rates
profitability
system GMM
- Event
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Geistige Schöpfung
- (who)
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Hanzlík, Petr
Teplý, Petr
- Event
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Veröffentlichung
- (who)
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Charles University in Prague, Institute of Economic Studies (IES)
- (where)
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Prague
- (when)
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2019
- 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
- Hanzlík, Petr
- Teplý, Petr
- Charles University in Prague, Institute of Economic Studies (IES)
Time of origin
- 2019
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