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Discussion Paper
Do Negative Interest Rates Explain Low Profitability of European Banks?
In this note, we examine the effects of low and negative sovereign yields on net interest margins and the general profitability of European banks.
Discussion Paper
What Equity Markets Said About Brexit-Related Costs to U.S. Banks
In this note, we use data on stock prices and betting market odds of Brexit for the period leading to and including the vote to estimate the magnitude of markets-implied costs of Brexit for U.S. banks.
Working Paper
\"Low-For-Long\" Interest Rates and Banks' Interest Margins and Profitability : Cross-Country Evidence
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 "low for long", margins and profitability fall by another 9 and 6 basis points, respectively.
Discussion Paper
Low-for-Long Interest Rates and Net Interest Margins of Banks in Advanced Foreign Economies
This note explores the empirical evidence between changes in interest rates and NIMs for different interest rate environments to discover the potential adverse effects of a low interest rate on bank NIMs. Using cross-country evidence can be insightful to assess a situation that is not so common in any individual country. Overall, the new empirical analysis shows that low rates are contributing to weaker NIMs and identifies an adverse effect that is materially larger when interest rates are low. It suggests that these effects can be material for banks in some key advanced foreign economies ...