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Journal article Open Access Scopus Source The journal / series is indexed in Scopus (SCImago list). The article itself has not been verified. 54 Citations Quartil Q1

Effects of a negative interest rate policy in bank profitability and risk taking: Evidence from European banks

López-Penabad, Maria Celia , Iglesias-Casal, Ana , Silva Neto, José Fernando
ISLA — Instituto Politécnico de Gestão e Tecnologia
Research in International Business and Finance, Volume 60, 04 2022
DOI: 10.1016/j.ribaf.2021.101597

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Abstract
This paper analyses the effect of a negative interest rate policy (NIRP) on profitability and risk taking in the European banking sector and whether this effect is differentiated according to the bank business model. Using a dataset of 2596 banks from 29 European countries over the period 2011–2019 and applying a static modelling approach, we conclude that the implementation of NIRPs lowers the net interest margin and the return on assets of a representative bank by 14.5 basis points and 18.5 basis points, respectively. We also conclude that a decrease in the short-term interest rate lowers the net interest margin when interest rates are already negative. In an environment of negative interest rates, we do not find that European banks take on more risk and conclude that the effects of the implementation of NIRPs influence banks’ profitability and risk taking differently, depending on the business model adopted.

Keywords

#negative interest rate policy #Bank profitability #bank risk-taking #net interest margin #return on assets #bank business models #European banking #short-term interest rates #central bank monetary policy #Profitability index #Interest rate #Net interest income #Margin (machine learning) #Monetary economics #Interest rate risk #Economics #Basis point #business

Bibliographic Details

Publication Type Journal article
Publication Year 2022
Journal / Conference / Work Research in International Business and Finance
ISSN 0275-5319
Volume / Issue Vol. 60
Pagination 101597
Quartile (SCImago) Q1
Scopus Indexing Indexed source (via SCImago)

ISLA Authors & Affiliations

J
José Fernando da Silva Neto
jose.neto@islagaia.pt ID: FB1D-2B00-5E6E
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