Negative Interest Rates: How Big a Challenge for Large Danish and Swedish Banks?

October 14, 2016

Preview Citation

Format: Chicago

Rima A Turk. Negative Interest Rates: How Big a Challenge for Large Danish and Swedish Banks?, (USA: International Monetary Fund, 2016) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Negative policy interest rates have prevailed for some years in Denmark and are a more recent development in Sweden. Among other potential side effects, negative rates could weaken banks’ profitability by reducing net interest income, their main source of earnings. However, an analysis of financial statements at the country rather than the consolidated group level shows that bank margins have been broadly stable. At least to date, lower interest income was offset by reductions in wholesale funding costs and higher fee income. Nonetheless, the impacts on bank health and lending from negative interest rates will need to continue to be monitored closely.

Subject: Bank soundness, Banking, Central bank policy rate, Deposit rates, Financial sector policy and analysis, Financial services, Monetary policy, National accounts, Negative interest rates, Personal income

Keywords: Bank, Bank activity, Bank conglomerate, Bank earnings component, Bank equities, Bank equity price, Bank leverage ratio, Bank operating income, Bank Profitability, Bank soundness, Central bank policy rate, Commercial bank, Denmark, Deposit rates, Earnings structure, Europe, Financing, Interest income, Interest rate, Leverage ratio, Mortgage bank subsidiary, Negative interest rates, Operating income, Personal income, Rate, Sweden, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/198
Stock No:

WPIEA2016198
ISBN:

9781475544688
ISSN:

1018-5941

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