The Consequences of Low Interest Rates for the Australian Banking Sector

Brassil, Anthony

doi:10.47688/rdp2022-08

Cited by 2 publications

(2 citation statements)

References 27 publications

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“…If weaker profitability makes banks less likely to extend new loans, policy easing might ultimately backfire (Brunnermeier & Koby 2019;Eggertsson et al 2019). Similarly, if banks broaden their loan spreads to maintain their profitability when interest rates are already low, the stimulus provided by decreasing some policy rates may be reduced (Brassil et al, 2018). The BI Rate, which can be found on the Bank Indonesia official website, is used as the interest rate in this study.…”

Section: Interest Ratementioning

confidence: 99%

The Effect of Third Party Funds on Rural Banks (BPR) Profitability With Lending Interest Rate as a Moderation Variable Period 2017 - 2022

Kezya Rima,

Rahmadhani Putri

2023

International Journal of The Newest Finance and Accounting

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Savings or other comparable kinds of deposits are accepted by BPR as a bank financial institution, which then distributes the money to BPR firms. To ascertain the state of the bank, it is necessary to evaluate banks as businesses. The profitability performance can be used to determine whether or not the banking industry's financial performance is sound. With loan rates serving as a moderating variable, this study attempts to present empirical data about the impact of Third Party Funds (DPK) on the Profitability of Rural Banks (BPR). The data used in this study were collected at OJK between 2017 and 2022. Explanatory research, which employs a quantitative methodology, is what this study is about every BPR in Indonesia who is registered and documented in the Indonesian Banking Statistics at OJK including the study's population. Samples were taken using a non-probability sampling methodology and a purposive sampling method. With the aid of the statistical application SPSS version 24, moderate regression analysis (MRA) was employed for data analysis. The study's findings demonstrated that third-party funds significantly impact rural banks' (BPR) profitability. Also, it was shown that interest rates had a considerable impact on rural banks' (BPR) profitability. Finally, Third Party Funds significantly impact profitability, with the effect being tempered by interest rates at Rural Banks (BPR).

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Section: Interest Ratementioning

confidence: 99%

The Effect of Third Party Funds on Rural Banks (BPR) Profitability With Lending Interest Rate as a Moderation Variable Period 2017 - 2022

Kezya Rima,

Rahmadhani Putri

2023

International Journal of The Newest Finance and Accounting

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“…A bank's overall profitability, as measured by its ROA, can be decomposed simplistically according to the identity below -see Brassil (2022) for a more complete decomposition: E are the values of banks' assets, liabilities and equity. This decomposition motivates us to examine not only the association between interest rates and ROA, but also the association with NIMs, Non-II and LLPs.…”

Section: Channels Of Monetary Policy To Bank Profitabilitymentioning

confidence: 99%

The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country Bank-level Data

Windsor¹,

Jokipii²,

Bussière³

2023

RBA Research Discussion Papers

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This paper provides a retrospective assessment of the relationship between bank profitability and interest rates, focusing on the period when rates were very low or negative. To do this we use new confidential bank-level data covering about 1,500 banks operating in 10 banking systems, with most samples spanning the two decades up to the end of 2019. Our analysis confirms the empirical regularity that declining interest rates reduce banks' net interest margins. However, we find a smaller effect than in previous studies: on average across countries, a 100 basis point fall in short-term interest rates results in a 5 basis point decline in net interest margins in the short run. Notably, there are substantial cross-country differences, and, in some cases, the estimated effect is greater. Importantly, the effect of lower interest rates on net interest margins is larger than the effect on assets returns, suggesting that banks can shield overall profitability in the face of lower interest rates. For example, lower interest rates alleviate debt-servicing burdens and are associated with a fall in provisions set aside to cover losses on loans. There is therefore no one-size-fits-all result for the impact of low interest rates on overall profitability: in some jurisdictions banks maintained their level of profitability as the beneficial impact of lower rates on loan-loss provisions and other factors, including an increased focus on cost efficiencies and streamlining business models, materially offset the drag from lower interest margins.

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The Consequences of Low Interest Rates for the Australian Banking Sector

Cited by 2 publications

References 27 publications

The Effect of Third Party Funds on Rural Banks (BPR) Profitability With Lending Interest Rate as a Moderation Variable Period 2017 - 2022

The Effect of Third Party Funds on Rural Banks (BPR) Profitability With Lending Interest Rate as a Moderation Variable Period 2017 - 2022

The Impact of Interest Rates on Bank Profitability: A Retrospective Assessment Using New Cross-country Bank-level Data

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