EconPapers    
Economics at your fingertips  
 

Adapting lending policies when negative interest rates hit banks’ profits

Óscar Arce (), Miguel García-Posada (), Sergio Mayordomo () and Steven Ongena ()
Additional contact information
Óscar Arce: Banco de España
Miguel García-Posada: Banco de España

No 1832, Working Papers from Banco de España, Working Papers Homepage

Abstract: What is the impact of negative interest rates on bank lending and risk-taking? To answer this question we study the changes in lending policies using both the Euro area Bank Lending Survey and the Spanish Credit Register. Banks whose net interest income is adversely affected by negative rates are concurrently lowly capitalized, take less risk and adjust loan terms and conditions to shore up their risk weighted assets and capital ratios. These banks also increase non-interest charges more. But, importantly, we find no differences in banks’ credit supply or standard setting, neither in the Euro area nor in Spain. These findings suggest that negative rates do not necessarily contract the supply of credit and that the so-called “reversal rate” may not have been reached yet.

Keywords: negative interest rates; risk taking; lending policies (search for similar items in EconPapers)
JEL-codes: G21 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eec, nep-mac and nep-mon
Date: 2018-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 18/Files/dt1832e.pdf First version, September 2018 (application/pdf)

Related works:
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:bde:wpaper:1832

Access Statistics for this paper

More papers in Working Papers from Banco de España, Working Papers Homepage Contact information at EDIRC.
Bibliographic data for series maintained by María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España ().

 
Page updated 2019-11-08
Handle: RePEc:bde:wpaper:1832