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

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

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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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.

Original languageEnglish
Article number106966
Number of pages16
JournalJournal of Banking and Finance
Volume154
Early online date20-Jul-2023
DOIs
Publication statusPublished - Sept-2023

Keywords

  • Bank profitability
  • Banking groups
  • Low interest rates
  • Monetary policy transmission
  • Net interest margin

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