Fed paper looks at negative rates’ impact on eurozone banks

Making policy rates negative lowers banks’ equity prices, particularly for deposit-intensive institutions, a paper published by the Federal Reserve finds.

Miguel Ampudia and Skander Van den Heuvel look at the effects on eurozone banks of the European Central Bank cutting short-term policy rates.

They find that a policy rate cut of 25 basis points in positive territory boosted eurozone banks’ equity prices by 0.97%. In contrast, a decrease in rates by the same amount in negative territory