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The Impact of Low Interest Rates on Bank Profitability: The case of the Eurozone
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
2018 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

In the euro area interest rates have dropped low for almost a decade now and it is anticipated to endure in the years to come. This creates challenges for banks performance, therefore this paper observes whether interest rates effect bank profitability. Further investigating whether loan growth should be an important factor to also consider in the model. We use data for 72 banks from various countries in the Eurozone for the period 2006-2016 and conduct a panel data analysis on this data. Results show that loan growth is not significant and is not a vital component to be included in the model. We find a negative significant relationship between the spread which compromises of long-term deposit rates minus the interest rate controlled by the European Central Bank. This suggests that, a decrease in interest rates can and had eroded bank profitability in the euro area.

Place, publisher, year, edition, pages
2018. , p. 55
Keywords [en]
low interest rates, bank profitability, loan growth, Eurozone
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-39719ISRN: JU-IHH-FÖA-2-20180627OAI: oai:DiVA.org:hj-39719DiVA, id: diva2:1212581
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Available from: 2018-06-20 Created: 2018-06-02 Last updated: 2018-06-20Bibliographically approved

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CiteExportLink to record
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