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Bank Profits and Margins in a World of Negative Rates

Philip Molyneux (), Alessio Reghezza and Ru Xie
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Alessio Reghezza: Bangor University
Ru Xie: University of Bath

No 18001, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: This paper investigates the influence of negative interest rate policy (NIRP) on bank margins and profitability. Using a dataset comprising 7242 banks from 33 OECD member countries over 2012-2016 and a difference-in-differences methodology, we find that bank margins and profits fell in NIRP-adopter countries compared to countries that did not adopt the policy. The results are robust to a variety of checks. This adverse NIRP effect appears to have been stronger for banks that were small, operating in competitive system as well as in countries where floating loan rates predominate.

Keywords: Negative interest rates; bank profitability; NIMs; difference-in-differences estimation (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 G21 F34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eec and nep-mac
Date: 2018-01
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Persistent link: https://EconPapers.repec.org/RePEc:bng:wpaper:18001

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