Daily Sabah logo

Politics
Diplomacy Legislation War On Terror EU Affairs Elections News Analysis
TÜRKİYE
Istanbul Education Investigations Minorities Expat Corner Diaspora
World
Mid-East Europe Americas Asia Pacific Africa Syrian Crisis Islamophobia
Business
Automotive Economy Energy Finance Tourism Tech Defense Transportation News Analysis
Lifestyle
Health Environment Travel Food Fashion Science Religion History Feature Expat Corner
Arts
Cinema Music Events Portrait Reviews Performing Arts
Sports
Football Basketball Motorsports Tennis
Opinion
Columns Op-Ed Reader's Corner Editorial
PHOTO GALLERY
JOBS ABOUT US RSS PRIVACY CONTACT US
© Turkuvaz Haberleşme ve Yayıncılık 2023

Daily Sabah logo

عربي
  • Politics
    • Diplomacy
    • Legislation
    • War On Terror
    • EU Affairs
    • Elections
    • News Analysis
  • TÜRKİYE
    • Istanbul
    • Education
    • Investigations
    • Minorities
    • Expat Corner
    • Diaspora
  • World
    • Mid-East
    • Europe
    • Americas
    • Asia Pacific
    • Africa
    • Syrian Crisis
    • Islamophobia
  • Business
    • Automotive
    • Economy
    • Energy
    • Finance
    • Tourism
    • Tech
    • Defense
    • Transportation
    • News Analysis
  • Lifestyle
    • Health
    • Environment
    • Travel
    • Food
    • Fashion
    • Science
    • Religion
    • History
    • Feature
    • Expat Corner
  • Arts
    • Cinema
    • Music
    • Events
    • Portrait
    • Reviews
    • Performing Arts
  • Sports
    • Football
    • Basketball
    • Motorsports
    • Tennis
  • Gallery
  • Opinion
    • Columns
    • Op-Ed
    • Reader's Corner
    • Editorial
  • TV

ECB: Banks generally ready for rising rates

by Associated Press

FRANKFURT Oct 10, 2017 - 12:00 am GMT+3
by Associated Press Oct 10, 2017 12:00 am

The European Central Bank says banks under its jurisdiction appear well-prepared to face unexpectedly higher interest rates, but may be less ready for disruption from online banking.

The ECB's banking supervision division released results yesterdayof a stress test that showed suddenly rising rates would increase net interest income, an important part of bank finances.

Earnings at some banks have lagged due to the current very low interest rate environment that squeezes the margins between rates at which banks borrow and their lending rates.

The central bank said that in a hypothetical interest rate shock involving an increase of 2 percentage points, net interest income would increase by 4.1 percent this year and 10.5 percent next. The stress test imagined a sudden overnight increase. That is a highly unlikely scenario, but one which helps show whether bank finances are robust.

The ECB concluded that "interest rate risk is well managed by most European banks."

It warned however that many banks are relying on questionable models to predict how their deposit customers might behave. The models were mostly constructed based on the years since 2008, which means they are based on experience from a period of falling rates. Deposits are usually one of the most stable sources of money for banks, and a sudden decision by lots of people to take their money elsewhere could hurt bank finances. That could happen if people chase higher rates elsewhere or get better offers for banking services from so-called fintech firms that use mobile banking, peer-to-peer lending or financial advice dispensed by software. The ECB said it would engage banks in discussion about their models.

The study showed that banks would show losses in the long-term value of their assets, such as investments in bonds and their mortgage business.

The ECB's bank supervision division is kept separate from its monetary policy duties, so the stress test doesn't provide any hints about the bank's thinking on the future course of its rate policy.

Currently, the bank is contemplating phasing out its stimulus program over the course of next year. The bank has been buying 60 billion euros ($70 billion) of bonds a month in the hope of keeping market interest rates low, thereby helping to stimulate the economy and get inflation up to its goal of just under 2 percent. The bank has said it does not plan to raise its benchmark interest rate from the current zero until well after the bond purchases end, which would mean not until 2019 at the earliest.

  • shortlink copied
  • RELATED TOPICS
    fight-against-terrorism DEUTSCHE-BANK US-LIBYA-RELATIONS
    KEYWORDS
    business
    The Daily Sabah Newsletter
    Keep up to date with what’s happening in Turkey, it’s region and the world.
    You can unsubscribe at any time. By signing up you are agreeing to our Terms of Use and Privacy Policy. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    No Image
    Morocco devastated by magnitude 6.8 earthquake
    PHOTOGALLERY
    • POLITICS
    • Diplomacy
    • Legislation
    • War On Terror
    • EU Affairs
    • News Analysis
    • TÜRKİYE
    • Istanbul
    • Education
    • Investigations
    • Minorities
    • Diaspora
    • World
    • Mid-East
    • Europe
    • Americas
    • Asia Pacific
    • Africa
    • Syrian Crisis
    • İslamophobia
    • Business
    • Automotive
    • Economy
    • Energy
    • Finance
    • Tourism
    • Tech
    • Defense
    • Transportation
    • News Analysis
    • Lifestyle
    • Health
    • Environment
    • Travel
    • Food
    • Fashion
    • Science
    • Religion
    • History
    • Feature
    • Expat Corner
    • Arts
    • Cinema
    • Music
    • Events
    • Portrait
    • Performing Arts
    • Reviews
    • Sports
    • Football
    • Basketball
    • Motorsports
    • Tennis
    • Opinion
    • Columns
    • Op-Ed
    • Reader's Corner
    • Editorial
    • Photo gallery
    • Jobs
    • privacy
    • about us
    • contact us
    • RSS
    © Turkuvaz Haberleşme ve Yayıncılık 2021