Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215403
Authors: 
Klein, Melanie
Year of Publication: 
2020
Series/Report no.: 
Bundesbank Discussion Paper No. 10/2020
Abstract: 
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.
Subjects: 
net interest margin
monetary policy
negative interest rates
bank profitability
lending
JEL: 
G21
E43
E52
ISBN: 
978-3-95729-679-5
Document Type: 
Working Paper

Files in This Item:
File
Size
718.42 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.