Macroprudential Policy and Net Interest Margins in European banks

Małgorzata Olszak (), Christophe Godlewski (), Iwona Kowalska and Agnieszka Paciorek
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Małgorzata Olszak: UW - Uniwersytet Warszawski [Polska] = University of Warsaw [Poland] = Université de Varsovie [Pologne]
Christophe Godlewski: LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg
Iwona Kowalska: UW - Uniwersytet Warszawski [Polska] = University of Warsaw [Poland] = Université de Varsovie [Pologne]
Agnieszka Paciorek: UW - Uniwersytet Warszawski [Polska] = University of Warsaw [Poland] = Université de Varsovie [Pologne]

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Abstract: Abstract In this study, we investigate the effects of macroprudential policies on banks' net interest margins (NIMs) using 3000 banks in 28 European Union countries from 1996 to 2019. Macroprudential tightening results in an immediate 2 basis point (bp) decrease in the NIMs, an increase in interest income (IIEA) of 7 bp, and an increase in interest expense (IEEA) of almost 10 bp. But the last two decline by 10.5 and 10.1 bp respectively 1–2 years later. The effect depends on the instrument type and varies based on the capital ratio and credit risk, but holds in high- and low-rate environments.

Keywords: Low-rate JEL Classification E44; E58; G21; G28; Risk; Capital; Macroprudential policy instruments; Net interest margin; Net interest margin Macroprudential policy instruments Capital Risk Low-rate JEL Classification E44 E58 G21 G28 (search for similar items in EconPapers)
Date: 2025-08-06
New Economics Papers: this item is included in nep-cba and nep-mon
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Published in Journal of Financial Services Research, 2025, ⟨10.1007/s10693-025-00449-x⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05298459

DOI: 10.1007/s10693-025-00449-x

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