Banks' Net Interest Margin and the Level of Interest Rates
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Banks' Net Interest Margin and the Level of Interest Rates
Busch, Ramona | Memmel, Christoph
Credit and Capital Markets – Kredit und Kapital, Vol. 50 (2017), Iss. 3 : pp. 363–392
19 Citations (CrossRef)
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Ramona Busch, Deutsche Bundesbank, Wilhelm-Epstein-Stra???e 14, 60431 Frankfurt am Main, Germany
Christoph Memmel, Deutsche Bundesbank, Wilhelm-Epstein-Stra???e 14, 60431 Frankfurt am Main
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Abstract
The prevailing view in the literature is that, in the long run, an increase in the level of interest rates will impact positively on banks' net interest margins. Using a time series of more than 40 years for the German banking system, we confirm this effect (the net interest margin increases by 7 basis points for every 100 basis point increase in the interest rate level). What is more, we show that the opposite effect exists in the short run. In addition, we analyze the consequences of the low-interest-rate environment and find that banks' interest margins on retail deposits, especially term deposits, have declined by up to 97 basis points.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Ramona Busch / Christoph Memmel: Banks’ Net Interest Margin and the Level of Interest Rates | 1 |