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margin compression

interest on reserves, margin compression, negative interest rates, net interest margin, risk adjustment
Banking Regulation, Financial Markets, The Fed & Central Banks

Misunderstanding the Net Interest Margin

Julien Noizet/June 1, 2016June 19, 2022

Lately, there have been a lot of discussions in the media and in the academic sphere surrounding banks’ net interest margin in the low (or negative) interest rate environment.  I have explained before how lowering interest rates below a certain threshold led to "margin compression" (see here), which…

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