Publication detail

Institutional and Other Determinants of the Net Interest Margin of US and European Banks in a Low Interest Rate Environment

Author(s): Mgr. Petr Hanzlík ,
prof. PhDr. Petr Teplý Ph.D.,
Type: IES Working Papers
Year: 2020
Number: 3
Published in: IES Working Papers 3/2020
Publishing place: Prague
Keywords: Fiscal multiplier, developing countries, regime-switching, the panel threshold vector autoregression model
JEL codes: C33, E43, G21
Suggested Citation: Hanzlik P., and Teply P.(2020): "Institutional and Other Determinants of the Net Interest Margin of US and European Banks in a Low Interest Rate Environment" IES Working Papers 3/2020. IES FSV. Charles University.
Abstract: In this paper, we analyze the relationship between the net interest margin (NIM) of US and European banks and market interest rates in a low interest rate environment. We contribute to the literature by examining a large sample of annual data on 1,155 banks from United States and EU member countries during the 2011-2016 period, which also covers periods of zero and negative rates in many of the observed countries. We test three hypotheses and come to three main conclusions. First, NIM is significantly influenced by the different institutional designs of bank-based or capital-based financial markets. Second, there are differences in NIM caused by bank size, although these are not fully captured by our methodology. Finally, we show significant differences by bank type: savings banks, real estate and mortgage banks, and cooperative banks report consistently lower NIMs than commercial banks and bank holdings. Contrary to other researchers, we observe a negative relationship between NIM and the yield curve slope.
Downloadable: wp_2020_03_Hanzlik_Teply
January 2022




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