Negative policy interest rates have prevailed for some years in Denmark and are a more
recent development in Sweden. Among other potential side effects, negative rates could
weaken banks’ profitability by reducing net interest income, their main source of earnings.
However, an analysis of financial statements at the country rather than the consolidated
group level shows that bank margins have been broadly stable. At least to date, lower interest
income was offset by reductions in wholesale funding costs and higher fee income.
Nonetheless, the impacts on bank health and lending from negative interest rates will need to
continue to be monitored closely.
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