EFFECT OF NEGATIVE INTEREST RATE OF BANKS' MARGIN AND PROFIT/
OWENAZE, Grace Abıbatu
EFFECT OF NEGATIVE INTEREST RATE OF BANKS' MARGIN AND PROFIT/ Grace Abıbatu OWENAZE; Supervısor: Danbala Danju - VIII, 51 sheets; figures, tables, 30.5 cm CD.
Thesis (MSc) - CYPRUS INYERNATIONAL UNIVERSITY INSTITUTION OF GRADUATE STUDIES AND RESEARCH Internatıonal Bankıng and Fınance
Includes bibliography sheets 43-48
ABSTRACT Conventional macroeconomist are of the view that interest rate cannot be set below zero as no one will be willing to give out a dollar today if they expect less than a dollar in the future, however, studies have shown that several countries have implemented NIRP in recent times, for example, Switzerland set interest rate at -0.75% which happen to be the lowest so far. Therefore, this study examined how banks net interest rate margin (NIM) and return on asset (ROA) are influenced by the introduction of NIRP. This study focused on Organization for Economic Co-operation and Development (OECD) countries; this is to capture countries with a similar economic environment which is a requirement when applying the difference in difference model carried out in this study. The sample collect is from 29 OECD countries and the treated group includes Euro Area, Hungary, Sweden, and Switzerland. The sample size covers 6979 financial institutions and the period cover is from 2012-2016. The difference in difference method is used in this study; this method was chosen because it is widely used particularly in pieces of literature that deals with policy evaluation. Data were collected from the World Bank data series to evaluate the macroeconomic variables and to get balance sheet data for the evaluation of banks' performance within the period of analysis Orbis bank focus was sourced. The study discovered that NIRP effect's coefficient is negative, big and statistically significant at 0.01% for both ROA and NIMs, this suggest that countries that implemented NIRP witnessed a decrease in banks' return on assets and net interest rate margin of approximately 1.55% and 0.44% respectively, in comparison to countries that did not implement the net negative interest rate. Therefore, the study recommended that monetary policy makers should critically consider additional measures and put policies in place to cater for the increased level of fragility faced by the financial sector when NIRP is introduced. Keywords: NIRP, net interest rate margin, return on asset, OECD.
Banks and banking
Interest rates
EFFECT OF NEGATIVE INTEREST RATE OF BANKS' MARGIN AND PROFIT/ Grace Abıbatu OWENAZE; Supervısor: Danbala Danju - VIII, 51 sheets; figures, tables, 30.5 cm CD.
Thesis (MSc) - CYPRUS INYERNATIONAL UNIVERSITY INSTITUTION OF GRADUATE STUDIES AND RESEARCH Internatıonal Bankıng and Fınance
Includes bibliography sheets 43-48
ABSTRACT Conventional macroeconomist are of the view that interest rate cannot be set below zero as no one will be willing to give out a dollar today if they expect less than a dollar in the future, however, studies have shown that several countries have implemented NIRP in recent times, for example, Switzerland set interest rate at -0.75% which happen to be the lowest so far. Therefore, this study examined how banks net interest rate margin (NIM) and return on asset (ROA) are influenced by the introduction of NIRP. This study focused on Organization for Economic Co-operation and Development (OECD) countries; this is to capture countries with a similar economic environment which is a requirement when applying the difference in difference model carried out in this study. The sample collect is from 29 OECD countries and the treated group includes Euro Area, Hungary, Sweden, and Switzerland. The sample size covers 6979 financial institutions and the period cover is from 2012-2016. The difference in difference method is used in this study; this method was chosen because it is widely used particularly in pieces of literature that deals with policy evaluation. Data were collected from the World Bank data series to evaluate the macroeconomic variables and to get balance sheet data for the evaluation of banks' performance within the period of analysis Orbis bank focus was sourced. The study discovered that NIRP effect's coefficient is negative, big and statistically significant at 0.01% for both ROA and NIMs, this suggest that countries that implemented NIRP witnessed a decrease in banks' return on assets and net interest rate margin of approximately 1.55% and 0.44% respectively, in comparison to countries that did not implement the net negative interest rate. Therefore, the study recommended that monetary policy makers should critically consider additional measures and put policies in place to cater for the increased level of fragility faced by the financial sector when NIRP is introduced. Keywords: NIRP, net interest rate margin, return on asset, OECD.
Banks and banking
Interest rates