Low Interest Rates and Banks’ Interest Margins: Does Deposit Market Concentration Matter?

Nimrod Segev, Sigal Ribon, Michael Kahn and Jakob Haan
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Sigal Ribon: Bank of Israel
Michael Kahn: Bank of Israel
Jakob Haan: University of Groningen

Journal of Financial Services Research, 2024, vol. 65, issue 2, No 3, 189-218

Abstract: Abstract Using a sample of 7,919 banks from 30 OECD countries over 1995–2019, we examine the impact of low interest rates on banks’ net interest margins. Our results confirm a positive relationship between interest rates and interest margins, which is stronger in a low interest rate environment. In more concentrated markets, however, interest margins are less sensitive to the level of interest rates, as interest rate sensitivities of income and expense margins match. But our results also suggest that the effect of market concentration on the link between interest rates and interest margins is weaker when interest rates approach zero.

Keywords: Bank profitability; Net interest margin; Low interest rates; Market concentration (search for similar items in EconPapers)
JEL-codes: E43 E52 G21 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10693-022-00393-0

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