Keep the Faith in Banking: New Evidence for the Effects of Negative Interest Rates Based on the Case of Finnish Cooperative Banks
56 Pages Posted: 27 Jan 2020
Date Written: January 2, 2020
Contrary to expectations, the continuous decline in money market interest rates between 2009 and 2014, and the following negative era for European interbank markets, has positively affected profitability of Finnish cooperative banks. We obtain these results that contrast sharply with previous studies’ findings especially by using a risk-adjusted measure for bank profitability and analysing the role of increasing wholesale funding ratio, particularly during the period of negative interest rates. Our results serve as a primer for more detailed analysis of factors affecting bank profitability during the negative interest rate era that looks set to persist into the near future.
Keywords: Banks, profitability, negative interest rates, dynamic conditional correlations
JEL Classification: C32, C58, G15, G21
Suggested Citation: Suggested Citation