Press "Enter" to skip to content

European Lenders Could Be At Peril Of Failing If Downbeat Rates Persist

Reportedly, following the ECB (European Central Bank) curbed rates in the last week, an economist reported CNBC that large banking institutions encounter the peril of stoppage if interest rates across Europe persist to remain negative. Simon Baptist—Global Chief Economist at Economist Intelligence Unit—said, “I feel there are big concerns for the banking sector’s profitability.” In the last week, the ECB trimmed its main deposit rate by around 10 basis points to −0.5%, which is an all-time low. The European banks for long have struggled in a constantly lower interest rate background. The rates in the Eurozone first reach zero in 2012 and were negative in 2014. The low-interest rates impacted banks’ profits since they narrowed the range that banks can earn.

Baptist said to CNBC, “If interest rates remain below zero, they are definitely not all going to be profitable, and will be running as they are at present. Either there would be consolidation or possibly some bank failures, or some actually radical amendments in business models.” In the last week, the ECB decreased the interest rate that banks receive for depositing cash with the central bank, pulling it further below zero. That basically means the central bank increased the amount it charges banks for the additional money they hold on to overnight.

Earlier, ECB was in news as the central bank curbed its deposit rate and launched a new bond-purchasing program. The ECB declared a huge new bond-buying program in a proposal to encourage the ailing Eurozone’s financial system. The central bank’s QE (quantitative easing) program will involve $21.9 Billion (20 billion euros) every month of net asset purchases for as much as it deems requirement. The ECB also curbed its main deposit rate by 10 basis points and now anticipates interest rates to stay at their existing or lower levels until it has seen its rise outlook.

Kelly Rivera
Kelly Rivera Author
Lead Editor At Global Newspaper 24

Kelly has been one of the most knowledgeable personalities in the Global Newspaper 24’s Business section team. While she has completed MBA in Finance Degree, she has always demonstrated her core knowledge in business management and affection toward the freedom of expression through words by crafting superlative news reports for all the readers of the Global Newspaper 24 platform. At present, Kelly works as the Head of the Business Department and is responsible for checking all the news reports for readability while adhering to the quality standards of Global Newspaper 24. Kelly is a super-active personality that loves to write news reports on various topics such as mergers & acquisitions, latest product launches, and major business events.

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *