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Contribution Details

Type Bachelor Thesis
Scope Discipline-based scholarship
Title The SNB's Monetary Policy and its Impacts on the Financial Sector
Organization Unit
Authors
  • Eveline Kleinburger
Supervisors
  • Jean-Charles Rochet
  • Nataliya Klimenko
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Date February 2017
Zusammenfassung Commercial banks play a crucial role within the monetary policy transmission process. To imple­ment monetary policy a central bank affects excessive reserves of commercial banks at the central bank to influence the lending rate. Banks then transmit the monetary policy impulse to the whole economy through their credit supply. This is called the bank lending channel. Hence, the soundness of the banking system is an important condition for an effective monetary policy transmission. The financial crisis in 2007 caused serious challenges to central banks. As conventional monetary policy became ineffective, central banks were enforced to implement unconventional monetary policy measures such as negative interest rates. Such unconventional measure can have serious impacts on bank profitability. Empirical findings of the impact of positive interest rates on bank profitability lead to the assumption that the implementation of negative interest rates negatively affects commercial banks. The Swiss National Bank implemented negative interest rates in January 2015. Nevertheless, nei­ther profit nor net interest income of domestic oriented banks decreased in 2015 as suggested by theory. One reason for this development is, that the SNB charges negative interest rates only on excessive reserves exceeding a defined threshold. Moreover, it occurred that banks increased their mortgage rate instead of passing negative interest rates to customers to maintain the interest mar­gin. This leads to the result that negative interest rates have not been transmitted effectively in Switzerland. Moreover, for the case of negative interest rates, there is a trade of between monetary policy transmission and bank profitability.
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