The Good, the Bad and the Ugly of Low Rates for European Banks
- Clients less likely to default, reducing soured-debt coverage
- Alternatives to lending income can be more volatile businesses
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Europe’s bankers greeted the news with a collective groan: The negative interest rates that had eaten into incomes for the last half a decade are set to continue and even worsen in the years ahead.
Pointing to yet another period of ragged earnings, executives called for special breaks from the European Central Bank to soften the blow of further rate cuts and other measures to stimulate economies across the eurozone. But some ECB officials have pushed back, saying interest rates aren’t the main culprit for feeble bank profitability and lenders actually benefited from the resulting economic growth.