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

See all articles by Juha-Pekka Junttila

Juha-Pekka Junttila

Jyväskylä University School of Business and Economics; Oulu Business Scool

Juhani Raatikainen

affiliation not provided to SSRN

Jukka Perttunen

University of Oulu - Department of Accounting & Finance

Date Written: January 2, 2020

Abstract

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

Junttila, Juha-Pekka and Raatikainen, Juhani and Perttunen, Jukka, Keep the Faith in Banking: New Evidence for the Effects of Negative Interest Rates Based on the Case of Finnish Cooperative Banks (January 2, 2020). Available at SSRN: https://ssrn.com/abstract=3512759 or http://dx.doi.org/10.2139/ssrn.3512759

Juha-Pekka Junttila (Contact Author)

Jyväskylä University School of Business and Economics ( email )

University of Jyväskylä
PO Box 35
Jyväskylä, FIN-40014
Finland

Oulu Business Scool ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland
+358-8-553 2916 (Phone)
+358-8-553 2906 (Fax)

Juhani Raatikainen

affiliation not provided to SSRN

No Address Available

Jukka Perttunen

University of Oulu - Department of Accounting & Finance ( email )

P.O. Box 4600
Oulu FIN-90014
Finland

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