XXVI Edition

14-15-16 December 2017"

Bank Margins and Profits in a World of Negative Rates

reghezza alessio, bangor business school

This paper investigates the influence of negative interest rate policy (NIRP) on bank margins and profitability. Using a dataset comprising 16,675 banks from 33 OECD member countries over 2012-2016 and a difference-in-differences methodology, we find that bank margins and profits fell in NIRP-adopter countries compared to countries that did not adopt the policy. The results are robust to a variety of checks. This adverse NIRP effect appears to have been stronger for banks that were small, operating in competitive system as well as in countries where floating negloan rates predominate.

Area: Banking

Keywords: negative interest rates, bank profitability, NIMs, difference-in-differences

Paper file

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