Bank profitability and risk-taking under low interest rates
Jacob Bikker () and
DNB Working Papers from Netherlands Central Bank, Research Department
The aim of this paper is to investigate the impact of the unusually low interest rate environment on the soundness of the US banking sector in terms of profitability and risk-taking. Using both dynamic and static modeling approaches and various estimation techniques, we find that the low interest rate environment indeed impairs bank performance and compresses net interest margins. Nonetheless, banks have been able to maintain their overall level of profits, due to lower provisioning, which in turn may endanger financial stability. Banks did not compensate for their lower interest income by expanding operations to include trading activities with a higher risk exposure.
Keywords: profitability; risk-taking; low interest rate environment; (dynamic) panel data models (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Bank Profitability and Risk-Taking under Low Interest Rates (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:560
Access Statistics for this paper
More papers in DNB Working Papers from Netherlands Central Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Richard Heuver ().