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Contribution Details
| Type | Conference Presentation |
| Scope | Discipline-based scholarship |
| Title | Adapting Lending Policies when Negative Interest Rates Hit Banks' Profits |
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| Presentation Type | paper |
| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published electronically before print/final form (Epub ahead of print) |
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| Event Title | ASSA |
| Event Type | conference |
| Event Location | Atlanta |
| Event Start Date | January 4 - 2019 |
| Event End Date | January 6 - 2019 |
| Abstract Text | What is the impact of negative interest rates on bank lending and risk-taking? To answer this question we study the changes in lending policies using both the Euro area Bank Lending Survey and the Spanish Credit Register. Banks whose net interest income is adversely affected by negative rates are concurrently lowly capitalized, take less risk and adjust loan terms and conditions to shore up their risk weighted assets and capitalization. These banks also increase non-interest charges more. But, importantly, we find no differences in banks’ credit supply or standard setting, neither in the Euro area nor in Spain. These findings suggest that negative rates do not necessarily contract the supply of credit and that the so-called “reversal rate” may not have been reached yet. |
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