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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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The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country Bank-level Data
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. ... Our analysis confirms the empirical regularity that declining interest rates reduce
https://www.rba.gov.au/publications/rdp/2023/2023-05.html
References
21 Jun 2023
RDP
2023-05
Brassil A (2022), ‘The Consequences of Low Interest Rates for the Australian Banking Sector’, RBA Research Discussion Paper No 2022-08. ... Brunnermeier MK and Y Koby (2018), ‘The Reversal Interest Rate’, NBER Working Paper No 25406.
https://www.rba.gov.au/publications/rdp/2023/2023-05/references.html
Data Description
21 Jun 2023
RDP
2023-05
To examine the impact of interest rates on banks' profitability, we rely on confidential bank-level data. ... NIMs and ROAs against the change in interest rates for the mean bank in all countries.
https://www.rba.gov.au/publications/rdp/2023/2023-05/data-description.html
Literature on Bank Profitability and Interest Rates
21 Jun 2023
RDP
2023-05
Literature on Bank Profitability and Interest Rates. Callan Windsor, Terhi Jokipii and Matthieu Bussiere. ... Starting with the impact on banks' interest margins, several studies identify a nonlinear relationship between interest rates and NIMs, with the
https://www.rba.gov.au/publications/rdp/2023/2023-05/literature-on-bank-profitability-and-interest-rates.html
The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country Bank-level Data
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. ... With lower short-term interest rates compressing NIMs, banks reacted by increasing loan volumes, which were funded at the MRO rate.
https://www.rba.gov.au/publications/rdp/2023/2023-05/full.html
Conclusion
21 Jun 2023
RDP
2023-05
looking back at the period when central banks lowered interest rates to mitigate the risks of deflation. ... In addition, holding interest rates ‘lower for longer’ does not appear to change the results noticeably.
https://www.rba.gov.au/publications/rdp/2023/2023-05/conclusion.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
The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country Bank-level Data
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/sections.html
Introduction
21 Jun 2023
RDP
2023-05
The impact on margins could also be larger if rates have been ‘lower for longer’ as interest rate hedges become less effective over time. ... On the other hand, if banks choose to protect their profitability by not lowering interest rates on their
https://www.rba.gov.au/publications/rdp/2023/2023-05/introduction.html
Read me file
21 Jun 2023
RDP
2023-05
RDP 2023-05: The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country Bank-level Data Read me file.
https://www.rba.gov.au/publications/rdp/2023/2023-05/read-me.html