Why have negative nominal interest rates had such a small effect on bank performance? Cross country evidence

Jose Lopez, Andrew Rose and Mark Spiegel

European Economic Review, 2020, vol. 124, issue C

Abstract: We explore the impact of negative policy rates on banks using data on 5200 banks from 27 advanced European and Asian countries, 2010–2017. Our cross-country panel specification allows us to condition on global shocks and bank-specific fixed effects. Banks offset interest income losses under negative rates with lower deposit expenses and gains in non-interest income, including fees and capital gains. Small and low deposit-ratio banks drive most results. Banks respond to negative rates by increasing lending activity and raising their share of deposit funding. Overall, our results indicate benign implications of negative rates to date for bank profitability.

Keywords: Zero; Effective; Lower; Data; Firm; Empirical; Regression; Panel; Deposit; Size (search for similar items in EconPapers)
JEL-codes: E43 G21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (76)

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Related works:
Working Paper: Why Have Negative Nominal Interest Rates Had Such a Small Effect on Bank Performance? Cross Country Evidence (2018)
Working Paper: Why Have Negative Nominal Interest Rates Had Such a Small Effect on Bank Performance? Cross Country Evidence (2018)
Working Paper: Why Have Negative Nominal Interest Rates Had Such a Small Effect on Bank Performance? Cross Country Evidence (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:124:y:2020:i:c:s0014292120300349

DOI: 10.1016/j.euroecorev.2020.103402

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