Series: Working Papers. 1832.
Author: Óscar Arce, Miguel García-Posada, Sergio Mayordomo and Steven Ongena.
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Abstract
What is the long-term impact of negative interest rates on bank lending? To answer
this question we construct a unique summary measure of negative rate exposure by
individual banks based on exclusive survey data, and couple it with the credit register of
Spain to identify this impact on the supply of credit to firms. We find that only after a few
years of negative rates do affected banks (relative to non-affected banks) decrease their
supply and increase their rates, especially when lowly capitalized and lending to risky
firms. However, no firms are facing funding constraints, yet.