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RBA Glossary definition for margin loans
margin loans – Loans which are made to investors to purchase financial assets, usually equities or units in managed funds. These assets are used as security for the margin loan. Margin loan clients are required to keep the ratio of borrowings to the value of underlying security below a pre-arranged level. When the ratio goes above this level, lenders will make a margin call, requiring the borrower to either repay some of the loan or provide additional security to support the loan.
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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
Our analysis confirms the empirical regularity that declining interest rates reduce banks’ net interest margins. ... impact of lower rates on loan-loss provisions and other factors, including an increased focus on cost efficiencies and streamlining
https://www.rba.gov.au/publications/rdp/2023/2023-05.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
Loan-loss provisions (LLP). (a). The ratio of LLPs (or impairment expenses) to cover non-performing loans expressed as a percentage of ATA. ... AUS. CAN. CHL. CZE. DEU. FRA. NOR. POL. SWE. CHE. Net interest margin (NIM).
https://www.rba.gov.au/publications/rdp/2023/2023-05/full.html
Appendix A: Summary of Selected Bank-level Papers
21 Jun 2023
RDP
2023-05
Lower rates have a negative impact on net interest margins, which is offset by a positive impact on loan-loss provisions. ... Federal Deposit Insurance Corporation. Panel GMM estimation. Lower interest rates compress net interest margins, but lower
https://www.rba.gov.au/publications/rdp/2023/2023-05/appendix-a.html
Introduction
21 Jun 2023
RDP
2023-05
demand. All else equal, lower interest rates are likely to directly impact bank profitability by eroding banks' net interest margins (NIMs). ... Lower interest rates can decrease loan-loss provisions by reducing the cost of servicing debt and lowering
https://www.rba.gov.au/publications/rdp/2023/2023-05/introduction.html
References
21 Jun 2023
RDP
2023-05
Busch R and C Memmel (2015), ‘Banks' Net Interest Margin and the Level of Interest Rates’, Deutsche Bundesbank Discussion Paper No 16/2015. ... Molyneux P, A Reghezza and R Xie (2019), ‘Bank Margins and Profits in a World of Negative Rates’,
https://www.rba.gov.au/publications/rdp/2023/2023-05/references.html
Empirical Findings across Countries
21 Jun 2023
RDP
2023-05
AUS. CAN. CHL. CZE. DEU. FRA. NOR. POL. SWE. CHE. Net interest margin (NIM). ... FRA. SWE. CHE. Net interest margin (NIM). r. 0.018. 0.036. 0.331.
https://www.rba.gov.au/publications/rdp/2023/2023-05/empirical-findings-across-countries.html
Non-technical summary for ‘The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country…
21 Jun 2023
RDP
2023-05
A key takeaway from our investigation is that the effect of a decline in interest rates on banks' net interest margins – a component of overall profitability – is small, economically speaking. ... In addition to this, banks found other ways to offset
https://www.rba.gov.au/publications/rdp/2023/2023-05/non-technical-summary.html
Data Description
21 Jun 2023
RDP
2023-05
Net interest margin (NIM). The ratio of net interest income (NII) expressed as a percentage of average interest earning assets (AEA). ... Loan-loss provisions (LLP). (a). The ratio of LLPs (or impairment expenses) to cover non-performing loans expressed
https://www.rba.gov.au/publications/rdp/2023/2023-05/data-description.html
Overview of the Data and Methodology
21 Jun 2023
RDP
2023-05
We focus on four different dependent variables: the return on assets (ROA), the NIM, non-interest income (Non-II) and loan-loss provisions (LLPs). ... International Settlements global systemically important banks (G-SIB) assessment sample – could have
https://www.rba.gov.au/publications/rdp/2023/2023-05/overview-of-the-data-and-methodology.html