Monetary policy and bank profitability in a low interest rate environment

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• dc.contributor.author Altavilla, Carlo
• dc.contributor.author Boucinha, Miguel
• dc.contributor.author Peydró, José-Luis
• dc.date.accessioned 2019-04-10T07:58:22Z
• dc.date.issued 2018
• dc.description.abstract We analyse the impact of standard and non-standard monetary policy on bank profitability. We use both proprietary and commercial data on individual euro area bank balance-sheets and market prices. Our results show that a monetary policy easing – a decrease in short-term interest rates and/or a flattening of the yield curve – is not associated with lower bank profits once we control for the endogeneity of the policy measures to expected macroeconomic and financial conditions. Accommodative monetary conditions asymmetrically affect the main components of bank profitability, with a positive impact on loan loss provisions and non-interest income offsetting the negative one on net interest income. A protracted period of low monetary rates has a negative effect on profits that, however, only materializes after a long time period and is counterbalanced by improved macroeconomic conditions. Monetary policy easing surprises during the low interest rate period improve bank stock prices and CDS.
• dc.description.sponsorship L.P. acknowledges the financial support from the Spanish Ministry of Economy, Industry and Competitiveness [Grant ECO2015-68136-P] and FEDER, UE and from the European Research Council Grant [project 648398].
• dc.format.mimetype application/pdf
• dc.identifier.citation Altavilla C, Boucinha M, Peydró JL. Monetary policy and bank profitability in a low interest rate environment. Economic Policy. 2018;33(96):531-86. DOI: 10.1093/epolic/eiy013
• dc.identifier.doi http://dx.doi.org/10.1093/epolic/eiy013
• dc.identifier.issn 0266-4658
• dc.identifier.uri http://hdl.handle.net/10230/37073
• dc.language.iso eng
• dc.publisher Oxford University Press
• dc.relation.ispartof Economic Policy. 2018;33(96):531-86.
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/648398
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2015-68136-P
• dc.rights © Oxford University Press. This is a pre-copyedited, author-produced version of an article accepted for publication in Economic Policy following peer review. The version of record Altavilla C, Boucinha M, Peydró J-L. Monetary policy and bank profitability in a low interest rate environment. Economic Policy. 2018;33(96):531-86 is available online at: https://doi.org/10.1093/epolic/eiy013
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Banks
• dc.subject.keyword Depository institutions
• dc.subject.keyword Micro finance institutions
• dc.subject.keyword Mortgages
• dc.subject.keyword Financial crises
• dc.subject.keyword Monetary policy
• dc.subject.keyword Interest rates: determination, term structure, an effects
• dc.subject.keyword Government policy and regulation
• dc.title Monetary policy and bank profitability in a low interest rate environment
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion