Negative interest rates become a worry for banks’ business models if they persist for two or three years, the European Central Bank’s chief economist said on Thursday.
The ECB has charged banks for parking money overnight since June 2014, leading to complaints from lenders that their margins are being squeezed because they cannot pass on the charge to their depositors.
In his clearest acknowledgment to date of banks’ concerns, Peter Praet said: “The persistence of negative rates over time — two, three years — is something that becomes quite worrisome if you think about the implications for business models.”
In addition, Peter Praet, Member of the Executive Board of the ECB, in his speech, indicated that measures taken by the ECB, including negative interest rate policy is sizeable (again excluding the March 2016 decisions). According to their staff assessment, the policy is contributing to raise euro area GDP by around 1.5% in the period 2015-18.
