"Low-For-Longï¿½ Interest Rates and Banks' Interest Margins and Profitability: Cross-Country Evidence
Stijn Claessens (),
Nicholas Coleman () and
No 11842, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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 3,385 banks from 47 countries from 2005 to 2013, we find that 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 â€œlow for longâ€ , margins and profitability fall by another 9 and 6 basis points, respectively.
Keywords: Bank profitability; interest rates; Low-for-long; Net interest margin (search for similar items in EconPapers)
JEL-codes: E43 G21 (search for similar items in EconPapers)
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