Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203220
Authors: 
Hanzlík, Petr
Teplý, Petr
Year of Publication: 
2019
Series/Report no.: 
IES Working Paper 02/2019
Abstract: 
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.
Subjects: 
banks
net interest margin
Herfindahl index
interest rates
profitability
system GMM
JEL: 
C33
E43
G21
Document Type: 
Working Paper
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