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Low interest rates and banks’ interest margins: Does belonging to a banking group matter?

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  • Argimon, Isabel
  • Danton, Jayson M.
  • de Haan, Jakob
  • Rodriguez-Martin, Javier
  • Rodriguez-Moreno, Maria

Abstract

Using data for a large sample of banks from 31 OECD countries over 1995–2018, we analyze the impact of belonging to a banking group on banks’ net interest margins. Our results confirm a positive relationship between interest rates and interest margins, which is stronger in a low-interest rate environment. For banks that are foreign subsidiaries of a banking group, we find that interest margins are less sensitive to the local interest rate. Our results show that such foreign subsidiaries are also sensitive to the interest rate prevailing in the group's headquarters.

Suggested Citation

  • Argimon, Isabel & Danton, Jayson M. & de Haan, Jakob & Rodriguez-Martin, Javier & Rodriguez-Moreno, Maria, 2023. "Low interest rates and banks’ interest margins: Does belonging to a banking group matter?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:jbfina:v:154:y:2023:i:c:s0378426623001644
    DOI: 10.1016/j.jbankfin.2023.106966
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    More about this item

    Keywords

    Bank profitability; Monetary policy transmission; Net interest margin; Low interest rates; Banking groups;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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