- 26 May 2020
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2020Details
- Recent events have shown that stress in non-banks can affect other parts of the financial system, for example through forced asset sales and reduced short-term funding. This box examines the interconnections between banks and non-banks through direct exposures, overlapping portfolios and ownership links, and considers how these can increase the risk of systemic contagion.
- 25 November 2020
- FINANCIAL STABILITY REVIEW - ARTICLEProspects for euro area bank lending margins in an extended low-for-longer interest rate environmentFinancial Stability Review Issue 2, 2020Details
- We examine some aspects of how the low-for-even-longer interest rate environment may affect bank lending margins and overall financial stability. We find evidence that margins fall more in response to declines in nominal short-term rates when these are low to begin with. The compression of margins reflects the sluggish response to further policy rate cuts of deposit rates as these approach the zero lower bound. Moreover, the analysis indicates that bank margins and overall profitability are influenced by both the level of real rates and, more materially, the level of inflation expectations embedded in nominal rates, which reflects the fact that bank profits are partly akin to seigniorage.
- JEL Code
- G2 : Financial Economics→Financial Institutions and Services
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects