\"Low-For-Long\" Interest Rates and Banks' Interest Margins and Profitability: Cross-Country Evidence

Stijn Claessens (), Nicholas Coleman () and Michael S. Donnelly

No 1197, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Interest rates in many advanced economies have been low for almost a decade now and are often expected to remain so. This creates challenges for banks. Using a sample of 3,385 banks from 47 countries from 2005 to 2013, we find that a one percentage point interest rate drop implies an 8 basis points lower net interest margin, with this effect greater (20 basis points) at low rates. Low rates also adversely affect bank profitability, but with more variation. And for each additional year of \"low for long\", margins and profitability fall by another 9 and 6 basis points, respectively.

Keywords: Interest rates; Bank profitability; Net interest margin; Low-for-long (search for similar items in EconPapers)
JEL-codes: E43 G21 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-ban and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
https://www.federalreserve.gov/econresdata/ifdp/2017/files/ifdp1197.pdf (application/pdf)

Related works:
Journal Article: “Low-For-Long” interest rates and banks’ interest margins and profitability: Cross-country evidence (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1197

DOI: 10.17016/IFDP.2017.1197

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().