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Macroprudential Policy and Net Interest Margins in European banks

Author

Listed:
  • Małgorzata Olszak

    (UW - Uniwersytet Warszawski [Polska] = University of Warsaw [Poland] = Université de Varsovie [Pologne])

  • Christophe Godlewski

    (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)

  • Iwona Kowalska

    (UW - Uniwersytet Warszawski [Polska] = University of Warsaw [Poland] = Université de Varsovie [Pologne])

  • Agnieszka Paciorek

    (UW - Uniwersytet Warszawski [Polska] = University of Warsaw [Poland] = Université de Varsovie [Pologne])

Abstract

In this study, we investigate the effects of macroprudential policies on banks' net interest margins (NIMs) using 3000 banks in 28 European Union countries from 1996 to 2019. Macroprudential tightening results in an immediate 2 basis point (bp) decrease in the NIMs, an increase in interest income (IIEA) of 7 bp, and an increase in interest expense (IEEA) of almost 10 bp. But the last two decline by 10.5 and 10.1 bp respectively 1–2 years later. The effect depends on the instrument type and varies based on the capital ratio and credit risk, but holds in high- and low-rate environments.

Suggested Citation

  • Małgorzata Olszak & Christophe Godlewski & Iwona Kowalska & Agnieszka Paciorek, 2025. "Macroprudential Policy and Net Interest Margins in European banks," Post-Print hal-05298459, HAL.
    • Handle: RePEc:hal:journl:hal-05298459
    DOI: 10.1007/s10693-025-00449-x
    Note: View the original document on HAL open archive server: https://univoak.hal.science/hal-05298459v1
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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