Claessens, Stijn, Coleman, Nicholas, Donnelly, Michael, (2016), “Low interest rates and banks’ net interest margins”, Voxeu, 18 May
Since the Global Crisis, interest rates in many advanced economies have been low and, in many cases, are expected to remain low for some time. Low interest rates help economies recover and can enhance banks’ balance sheets and performance, but persistently low rates may also erode the profitability of banks if they are associated with lower net interest margins. This column uses new cross-country evidence to confirm that decreases in interest rates do indeed contribute to weaker net interest margins, with a greater adverse effect when rates are already low.
Relevant Posts
- Stiglitz, Joseph, (2016), “What’s Wrong With Negative Interest Rates?”, Social Europe, 13 April
- Rachel, Łukasz, D. Smith, Thomas, (2016), “Towards a global narrative on long-term real interest rates”, Voxeu, 15 January