Nonstandard monetary policies and bank profitability: The case of Spain

Abstract

The aim of this study is to examine the effects of non-standard monetary policy measures implemented by the Eurosystem on the Spanish banking sector profitability. To do this, a new database is built merging data from the Spanish Banking Industry Statistical Yearbook and from the Spanish Stock Market Commission. Applying different econometric techniques to a panel of 54 Spanish banks that covers the period 2001-2017 and controlling for bank-specific factors and macroeconomic conditions, no discernible impact is found between the Eurosystem's non-standard monetary policy measures (ECB's total assets, excess reserves and the slope of the yield curve) and bank profitability measured as return on assets, pre-tax operating income and interest margins. This result is robust to different specifications and to different groups of banks.

The effect of Euribor on banking profitability: evidence from the Spanish banking system

“…By contrast, the ECB's assets growth is not significantly related with the sector's average profitability. This result is consistent with Tercero-Lucas (2020).…”

“…Tercero-Lucas (2020) overcomes the problem of mergers in a panel data setting by constructing "new virtual entities" through adding their balance sheets. In our view, treating as a single unit banks that (in the past) behave as separate entities because latter they merged is a strong assumption.…”

Central Banks’ Monetary Policy in the Face of the COVID-19 Economic Crisis: Monetary Stimulus and the Emergence of CBDCs

“…As a result of these factors, in the coming years the number of bank mergers may increase, and the sector will become more concentrated. In the case of Spain, the announcement of merger talks between Caixa Bank and Bankia was made at the beginning of September 2020, and these mergers will likely take place in other banks at the European level [59].…”

From the Great Recession to the COVID-19 Pandemic: The Risk of Expansionary Monetary Policies

“…The academic literature on the reaction of central banks to the Great Recession is abundant (Bagus and Howden 2009;Bagus and Schiml 2010;Guerello 2018;Guerini et al 2018;Rogoff 2017;Kenourgios et al 2019;Tercero-Lucas 2021). The first two studies analyse the monetary policy of the Fed and the ECB during the 2008 crisis.…”

“…The sector is also trying to adapt to an environment characterised by the digitalisation of financial services and a fall in the traditional financial margin due to negative interest rates. For this reason, bank mergers are likely to take place in the coming years (Tercero-Lucas 2021).…”