“Low-For-Long” interest rates and banks’ interest margins and profitability: Cross-country evidence

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

Journal of Financial Intermediation, 2018, vol. 35, issue PA, 1-16

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 3385 banks from 47 countries from 2005 to 2013, we find 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)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (74)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042957317300372
Full text for ScienceDirect subscribers only

Related works:
Working Paper: \"Low-For-Long\" Interest Rates and Banks' Interest Margins and Profitability: Cross-Country Evidence (2017)
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:eee:jfinin:v:35:y:2018:i:pa:p:1-16

DOI: 10.1016/j.jfi.2017.05.004

Access Statistics for this article

Journal of Financial Intermediation is currently edited by Elu von Thadden

More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().