Negative Interest Rates: How Big a Challenge for Large Danish and Swedish Banks?

Rima Turk Ariss

No 2016/198, IMF Working Papers from International Monetary Fund

Abstract: Negative policy interest rates have prevailed for some years in Denmark and are a more recent development in Sweden. Among other potential side effects, negative rates could weaken banks’ profitability by reducing net interest income, their main source of earnings. However, an analysis of financial statements at the country rather than the consolidated group level shows that bank margins have been broadly stable. At least to date, lower interest income was offset by reductions in wholesale funding costs and higher fee income. Nonetheless, the impacts on bank health and lending from negative interest rates will need to continue to be monitored closely.

Keywords: WP; bank; interest rate; rate; commercial bank; financing; Negative interest rates; Bank Profitability; Denmark; Sweden; leverage ratio; operating income; mortgage bank subsidiary; bank activity; bank equity price; bank equities; earnings structure; bank conglomerate; bank leverage ratio; interest income; bank earnings component; bank operating income; Deposit rates; Central bank policy rate; Personal income; Bank soundness; Europe (search for similar items in EconPapers)
Pages: 29
Date: 2016-10-14
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Citations: View citations in EconPapers (8)

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