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RBA Glossary definition for interest rate
interest rate – The term used to describe the cost of borrowing money or the return to the owner of the funds which are invested or lent out. It is usually expressed as a percent per annum of the amount of money borrowed, lent or invested.
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Supplementary Information for RDP 2023-05: The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New…
21 Jun 2023
RDP
2023-05
Research Discussion Paper – RDP 2023-05 The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country Bank-level Data.
https://www.rba.gov.au/publications/rdp/2023/2023-05/supplementary-information.html
Appendix A: Summary of Selected Bank-level Papers
21 Jun 2023
RDP
2023-05
Federal Deposit Insurance Corporation. Panel GMM estimation. Lower interest rates compress net interest margins, but lower loan-loss provisions. ... SNL Financial. Panel DiD regressions. Bank margins and overall profitability fared worse in countries
https://www.rba.gov.au/publications/rdp/2023/2023-05/appendix-a.html
Empirical Findings across Countries
21 Jun 2023
RDP
2023-05
With lower short-term interest rates compressing NIMs, banks reacted by increasing loan volumes, which were funded at the MRO rate. ... Moreover, Australian banks tend to have interest rate hedges, which smooth profits and so delays the reduction in
https://www.rba.gov.au/publications/rdp/2023/2023-05/empirical-findings-across-countries.html
Channels of Monetary Policy to Bank Profitability
21 Jun 2023
RDP
2023-05
Given the stock of variable-rate loans is larger than the flow, lower interest rates are expected to lower provisions. ... The extent to which some banking systems use interest rate swaps to hedge this risk will also cause differences in the pass through
https://www.rba.gov.au/publications/rdp/2023/2023-05/channels-of-monetary-policy-to-bank-profitability.html
Overview of the Data and Methodology
21 Jun 2023
RDP
2023-05
In contrast to previous research, we also permit country-specific thresholds for what are considered low interest rate episodes and identify these from the history of short-term interest rates within ... Country-specific thresholds ensure there is
https://www.rba.gov.au/publications/rdp/2023/2023-05/overview-of-the-data-and-methodology.html
Analytical Framework
21 Jun 2023
RDP
2023-05
on the interaction term r. t. low. t. indicates the differential impact a change in the short-term rate has on the profitability of smaller banks when interest rates are low. ... A longer period of low interest rates could be expected to increase the
https://www.rba.gov.au/publications/rdp/2023/2023-05/analytical-framework.html