Publication detail

Key Factors of the Net Interest Margin of European and US Banks in a Low Interest Rate Environment

Author(s): Mgr. Petr Hanzlík ,
prof. PhDr. Petr Teplý Ph.D.,
Type: Articles in journals with impact factor
Year: 2020
Number: 0
ISSN / ISBN: 1099-1158
Published in: International Journal of Finance and Economics, USA
Publishing place: John Wiley & Sons Ltd.
Keywords: banks, institutional design, interest rates, net interest margin, profitability, system GMM
JEL codes: C33, E43, G21
Suggested Citation: Hanzlík, P., Teplý, P. (2020). Key Factors of the Net Interest Margin of European and US Banks in a Low Interest Rate Environment.International Journal of Finance and Economics. https://doi.org/10.1002/ijfe.2299
Grants: GACR 20-00178S - The impact of the normalisation of interest rates on risk management VŠE IP100040
Abstract: In this paper, we contribute to the literature by examining the determinants of net interest margin (NIM) of European and US banks in a zero lower bound situation while controlling for important institutional design factors. We analyse a large sample of annual data on 629 European banks and 526 US 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 capital-based (the UK and the US) and bank-based financial markets (continental Europe). Second, there are differences in NIM caused by bank size. 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.

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