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

30 Pages Posted: 9 Dec 2016

See all articles by Rima Turk-Ariss

Rima Turk-Ariss

International Monetary Fund; Economic Research Forum

Date Written: October 2016

Abstract

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.

Keywords: Negative interest rates, Denmark, Sweden, Euro Area, Banks, Profit margins, Interest rates, Interest rate policy, Stock markets, Negative interest rates; Bank Profitability; Denmark; Sweden.

JEL Classification: G21, E43, E50, E58

Suggested Citation

Turk-Ariss, Rima, Negative Interest Rates: How Big a Challenge for Large Danish and Swedish Banks? (October 2016). IMF Working Paper No. 16/198. Available at SSRN: https://ssrn.com/abstract=2882635

Rima Turk-Ariss (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Economic Research Forum ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

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