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Recent developments in the cost of bank equity in Europe

Author

Listed:
  • Luis Fernández Lafuerza
  • Javier Mencía

Abstract

This article assesses the cost of bank equity in Spain and the euro area since 2007, focusing particularly on the period of the COVID-19 pandemic. There was a marked rise in the cost of equity in March 2020, followed by a decline in the subsequent months. The article assesses the factors responsible for this movement, and compares it against the change in interest rates on alternative bank funding instruments.

Suggested Citation

  • Luis Fernández Lafuerza & Javier Mencía, 2020. "Recent developments in the cost of bank equity in Europe," Economic Bulletin, Banco de España, issue 4/2020.
    • Handle: RePEc:bde:journl:y:2020:i:12:d:aa:n:37
    Note: Analytical Articles
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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/InformesBoletinesRevistas/ArticulosAnaliticos/20/T4/descargar/Files/be2004-art37e.pdf
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    More about this item

    Keywords

    Cost of equity; bank funding; COVID-19.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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