Bank intermediation activity in a low interest rate environment

Leonardo Gambacorta, Michael Brei and Claudio Borio

No 13980, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper investigates how the prolonged period of low interest rates affects bank intermediation activity. We use data for 113 large international banks headquartered in 14 major advanced economies during the period 1994–2015. We find that low interest rates induce banks to shift their activities from interest-generating to fee-related and trading activities. This rebalancing is stronger for low capitalised banks. Banks also moderately adjust their funding structure, away from short-term market funding towards deposits. We observe a concomitant decline in the risk-weighted asset ratio and a reduction in loan-loss provisions, which is consistent with signs of evergreening.

Keywords: Monetary policy; Bank business models; Financial crisis (search for similar items in EconPapers)
JEL-codes: C53 E43 E52 G21 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mac
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Citations: View citations in EconPapers (33)

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Related works:
Journal Article: Bank intermediation activity in a low‐interest‐rate environment (2020)
Working Paper: Bank intermediation activity in a low‐interest‐rate environment (2020)
Working Paper: Bank intermediation activity in a low interest rate environment (2019)
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