Do low interest rates hurt banks’ equity values?

Miguel Ampudia

Research Bulletin, 2019, vol. 60

Abstract: The effects of interest rate surprises on banks are different when nominal interest rates are very low. In “normal” times, policy rate announcements that are below market expectations tend to boost banks’ stock prices on average. When interest rates are very low, however, there is a reversal of this effect: at such times, negative rate surprises reduce banks’ stock prices. This negative impact is larger for banks whose funding relies more on retail deposits than on other sources of funding. JEL Classification: E52, E58, G21

Keywords: bank profitability; ECB; monetary policy; negative rates (search for similar items in EconPapers)
Date: 2019-07
Note: 2445760
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