Low Interest Rates and Monetary Policy Effectiveness

Low Interest Rates and Monetary Policy Effectiveness


World economy is stuck in low interest rates environment.   Euro area, japan have even negative interest rates.  US Fed Reserve since December 2016 has started raising interest rates.

Attempts by Central Banks have not been effective in increasing economic growth.  Many Economists now are presenting counter intuitive reasons for low growth.


Please see my earlier related posts.

Business Investments and Low Interest Rates

Mergers and Acquisitions – Long Term Trends and Waves


Since 2016, there are several new studies published exploring effectiveness of monetary policy in low interest rates environment.


Is monetary policy less effective when interest rates are persistently low?

by Claudio Borio and Boris Hofmann

April 2017

Is Monetary Policy Less Effective When Interest Rates are Persistently Low?


In March 2017, Brookings Institution published the following study by the economists of the US Federal Reserve.

Monetary policy in a low interest rate world


Fed Reserve of Chicago published speech given by Charles Evans in 2016.

Monetary Policy in a Lower Interest Rate Environment


Lecture by Vítor Constâncio, Vice-President of the ECB, Macroeconomics Symposium at Utrecht School of Economics, 15 June 2016

The challenge of low real interest rates for monetary policy


Journal of Policy Modeling published a paper by Ken Rogoff.  Paper was presented at American Economic Association, 2017.

Monetary policy in a low interest rate world


Eight BIS CCA Research Conference on “Low interest rates, monetary policy and international spillovers”, hosted by the Board of Governors of the Federal Reserve System, Washington DC, 25-26 May 2017

Low interest rates, monetary policy and international spillovers


Economist Magazine published an article on views of Bill Gross and others.

November 2015

Do ultra-low interest rates really damage growth?


Bloomberg Business Week published an article describing views of Charles Calomiris and others.

June 2017

Is the World Overdoing Low Interest Rates?


Claudio Borio and Boris Hofmann

The Paper was prepared for the Reserve Bank of Australia conference
“Monetary Policy and Financial Stability in a World of Low Interest Rates”,

16-17 March 2017, Sydney

Is monetary policy less effective when interest rates are persistently low?


Monetary policy and bank lending in a low interest rate environment: diminishing effectiveness?

Claudio Borio and Leonardo Gambacorta

February 2017

Monetary policy and bank lending in a low interest rate environment: diminishing effectiveness?


Negative Interest Rate Policy (NIRP):
Implications for Monetary Transmission and Bank Profitability in the Euro Area

Prepared by Andreas (Andy) Jobst and Huidan Lin


August 2016

Negative Interest Rate Policy (NIRP): Implications for Monetary Transmission and Bank Profitability in the Euro Area


James Bullard, President and CEO of Federal Reserve Bank of St. Louis

March 24, 2009

The Henry Thornton Lecture, Cass Business School, London

Effective Monetary Policy in a Low Interest Rate Environment


Federal Reserve Bank of New York

Monetary Policy, Financial Conditions, and Financial Stability

Tobias Adrian
Nellie Liang

Monetary Policy, Financial Conditions, and Financial Stability


Monetary policy, the financial cycle and ultra-low interest rates

Mikael Juselius of Bank of Finland

DNB Workshop on “Estimating and Interpreting Financial Cycles”

Amsterdam, 2 September 2016

Monetary policy, the financial cycle and ultra-low interest rates

BIS Paper

Monetary policy, the financial cycle and ultra-low interest rates


The dynamics of real interest rates, monetary policy and its limits

Philippe d’Arvisenet

May 2016

The dynamics of real interest rates, monetary policy and its limits


Output Gaps and Monetary Policy at Low Interest Rates

By Roberto M. Billi

Output Gaps and Monetary Policy at Low Interest Rates


The insensitivity of investment to interest rates: Evidence from a survey of CFOs

Steve A. Sharpe and Gustavo A. Suarez


The insensitivity of investment to interest rates: Evidence from a survey of CFOs


Does Prolonged Monetary Policy Easing Increase Financial Vulnerability?

Prepared by Stephen Cecchetti, Tommaso Mancini-Griffoli, and Machiko Narita

February 2017

Does Prolonged Monetary Policy Easing Increase Financial Vulnerability?


The Microeconomic Perils of Monetary Policy Experiments

Charles W. Calomiris

Cato Institute

The Microeconomic Perils of Monetary Policy Experiments


Why Have the Fed’s Policies Failed to Stimulate the Economy?

Mickey D. Levy

Cato Institute

Why Have the Fed’s Policies Failed to Stimulate the Economy?


Low Interest Rates and Banks’ Profitability : Update July 2017

Low Interest Rates and Banks’ Profitability : Update July 2017


Please see my previous posts.

Impact of Low Interest Rates on Bank’s Profitability

Low Interest Rates and Banks Profitability: Update – December 2016


Since December 2016, there are several new studies published which study low interest rates and Banks profitability.



Liberty State economics – a Blog of New York Federal Reserve has published a new column in June 2017.

Low Interest Rates and Bank Profits



Reduced Viability? Banks, Insurance Companies, and Low Interest Rates

CFA Institute


CFA Institute Blog: Low Interest Rates and Banks



Changes in Profitability for Primary Dealers since the Financial Crisis

Benjamin Allen

Skidmore College


Changes in Profitability for Primary Dealers since the Financial Crisis



Deloitte Consulting has published a new report in 2017 on Bank Models viability in environment of low interest rates.

Business model analysis European banking sector model in question


July 7, 2016
International banker





Low interest rates place a strain on the banks

bank of Finland





The profitability of EU banks: Hard work or a lost cause?


October 2016





The influence of monetary policy on bank profitability

Claudio Borio





Can Low Interest Rates be Harmful: An Assessment of the Bank Risk-Taking Channel in Asia


Asian Development Bank





Determinants of bank’s interest margin in the aftermath of the crisis: the effect of interest rates and the yield curve slope

Paula Cruz-García, Juan Fernández de Guevara and Joaquín Maudos





Dutch Central Bank has published a new study in November of 2016 on Banks’ Profitability and risk taking in a prolonged environment of Low Interest Rates.

Bank profitability and risk taking in a prolonged environment of low interest rates: a study of interest rate risk in the banking book of Dutch banks



Net interest margin in a low interest rate environment: Evidence for Slovenia

Net interest margin in a low interest rate environment: Evidence for Slovenia


Global Financial Stability Report, April 2017: Getting the Policy Mix Right



IMF Global Financial Stability Report April 2017



Negative Interest Rates: Forecasting Banks’ Profitability in a New Environment

Stefan Kerbl, Michael Sigmund

Bank of Finland

Negative Interest Rates: Forecasting Banks’ Profitability in a New Environment



Low Interest Rates and the Financial System

Remarks by Jerome H. Powell
Member Board of Governors of the Federal Reserve System
at the 77th Annual Meeting of the American Finance Association
Chicago, Illinois
January 7, 2017




Bad zero: Financial Stability in a Low Interest Rate Environment

Elena Carletti  Giuseppe Ferrero

18 June 2017


Short term Thinking in Investment Decisions of Businesses and Financial Markets

Short term Thinking in Investment Decisions of Businesses and Financial Markets


When companies buyback shares and pay dividends rather than investing in new capacity, it leads to low economic growth and low aggregate demand.

Central Banks respond by cutting interest rates.  Yet Businesses do not invest in new capacity.

Many studies attribute this to short term thinking dominant in corporate investment decisions.  Pressures from shareholders push corporate managers to be short term oriented.

Many economists and thinkers have criticized this recently as advanced economies are suffering from anemic growth.

Larry Summers has invoked Secular Stagnation.  He says one of the reason for Secular Stagnation is short term thinking.

Andy Haldane of Bank of England has criticized short term thinking as it prevents investments and causes low economic growth.

Key Terms:

  • Quarterly Capitalism
  • Secular Stagnation
  • Short Term Thinking
  • Low Economic Growth
  • Business Investments
  • Real Interest Rates
  • Monetary Policy
  • Income and Wealth Inequality
  • Aggregate Demand
  • Productive Capacity
  • Productivity growth
  • Long Term Investments
  • Share Buybacks
  • Dividends
  • Corporate Cash Pools


Capitalism for the Long Term

The near meltdown of the financial system and the ensuing Great Recession have been, and will remain, the defining issue for the current generation of executives. Now that the worst seems to be behind us, it’s tempting to feel deep relief—and a strong desire to return to the comfort of business as usual. But that is simply not an option. In the past three years we’ve already seen a dramatic acceleration in the shifting balance of power between the developed West and the emerging East, a rise in populist politics and social stresses in a number of countries, and significant strains on global governance systems. As the fallout from the crisis continues, we’re likely to see increased geopolitical rivalries, new international security challenges, and rising tensions from trade, migration, and resource competition. For business leaders, however, the most consequential outcome of the crisis is the challenge to capitalism itself.

That challenge did not just arise in the wake of the Great Recession. Recall that trust in business hit historically low levels more than a decade ago. But the crisis and the surge in public antagonism it unleashed have exacerbated the friction between business and society. On top of anxiety about persistent problems such as rising income inequality, we now confront understandable anger over high unemployment, spiraling budget deficits, and a host of other issues. Governments feel pressure to reach ever deeper inside businesses to exert control and prevent another system-shattering event.

My goal here is not to offer yet another assessment of the actions policymakers have taken or will take as they try to help restart global growth. The audience I want to engage is my fellow business leaders. After all, much of what went awry before and after the crisis stemmed from failures of governance, decision making, and leadership within companies. These are failures we can and should address ourselves.

In an ongoing effort that started 18 months ago, I’ve met with more than 400 business and government leaders across the globe. Those conversations have reinforced my strong sense that, despite a certain amount of frustration on each side, the two groups share the belief that capitalism has been and can continue to be the greatest engine of prosperity ever devised—and that we will need it to be at the top of its job-creating, wealth-generating game in the years to come. At the same time, there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results.

Most important, the dialogue has clarified for me the nature of the deep reform that I believe business must lead—nothing less than a shift from what I call quarterly capitalism to what might be referred to as long-term capitalism. (For a rough definition of “long term,” think of the time required to invest in and build a profitable new business, which McKinsey research suggests is at least five to seven years.) This shift is not just about persistently thinking and acting with a next-generation view—although that’s a key part of it. It’s about rewiring the fundamental ways we govern, manage, and lead corporations. It’s also about changing how we view business’s value and its role in society.

There are three essential elements of the shift. First, business and finance must jettison their short-term orientation and revamp incentives and structures in order to focus their organizations on the long term. Second, executives must infuse their organizations with the perspective that serving the interests of all major stakeholders—employees, suppliers, customers, creditors, communities, the environment—is not at odds with the goal of maximizing corporate value; on the contrary, it’s essential to achieving that goal. Third, public companies must cure the ills stemming from dispersed and disengaged ownership by bolstering boards’ ability to govern like owners.

When making major decisions, Asians typically think in terms of at least 10 to 15 years. In the U.S. and Europe, nearsightedness is the norm.

None of these ideas, or the specific proposals that follow, are new. What is new is the urgency of the challenge. Business leaders today face a choice: We can reform capitalism, or we can let capitalism be reformed for us, through political measures and the pressures of an angry public. The good news is that the reforms will not only increase trust in the system; they will also strengthen the system itself. They will unleash the innovation needed to tackle the world’s grand challenges, pave the way for a new era of shared prosperity, and restore public faith in business.

1. Fight the Tyranny of Short-Termism

As a Canadian who for 25 years has counseled business, public sector, and nonprofit leaders across the globe (I’ve lived in Toronto, Sydney, Seoul, Shanghai, and now London), I’ve had a privileged glimpse into different societies’ values and how leaders in various cultures think. In my view, the most striking difference between East and West is the time frame leaders consider when making major decisions. Asians typically think in terms of at least 10 to 15 years. For example, in my discussions with the South Korean president Lee Myung-bak shortly after his election in 2008, he asked us to help come up with a 60-year view of his country’s future (though we settled for producing a study called National Vision 2020.) In the U.S. and Europe, nearsightedness is the norm. I believe that having a long-term perspective is the competitive advantage of many Asian economies and businesses today.

Myopia plagues Western institutions in every sector. In business, the mania over quarterly earnings consumes extraordinary amounts of senior time and attention. Average CEO tenure has dropped from 10 to six years since 1995, even as the complexity and scale of firms have grown. In politics, democracies lurch from election to election, with candidates proffering dubious short-term panaceas while letting long-term woes in areas such as economic competitiveness, health, and education fester. Even philanthropy often exhibits a fetish for the short term and the new, with grantees expected to become self-sustaining in just a few years.

Lost in the frenzy is the notion that long-term thinking is essential for long-term success. Consider Toyota, whose journey to world-class manufacturing excellence was years in the making. Throughout the 1950s and 1960s it endured low to nonexistent sales in the U.S.—and it even stopped exporting altogether for one bleak four-year period—before finally emerging in the following decades as a global leader. Think of Hyundai, which experienced quality problems in the late 1990s but made a comeback by reengineering its cars for long-term value—a strategy exemplified by its unprecedented introduction, in 1999, of a 10-year car warranty. That radical move, viewed by some observers as a formula for disaster, helped Hyundai quadruple U.S. sales in three years and paved the way for its surprising entry into the luxury market.

To be sure, long-term perspectives can be found in the West as well. For example, in 1985, in the face of fierce Japanese competition, Intel famously decided to abandon its core business, memory chips, and focus on the then-emerging business of microprocessors. This “wrenching” decision was “nearly inconceivable” at the time, says Andy Grove, who was then the company’s president. Yet by making it, Intel emerged in a few years on top of a new multi-billion-dollar industry. Apple represents another case in point. The iPod, released in 2001, sold just 400,000 units in its first year, during which Apple’s share price fell by roughly 25%. But the board took the long view. By late 2009 the company had sold 220 million iPods—and revolutionized the music business.

It’s fair to say, however, that such stories are countercultural. In the 1970s the average holding period for U.S. equities was about seven years; now it’s more like seven months. According to a recent paper by Andrew Haldane, of the Bank of England, such churning has made markets far more volatile and produced yawning gaps between corporations’ market price and their actual value. Then there are the “hyperspeed” traders (some of whom hold stocks for only a few seconds), who now account for 70% of all U.S. equities trading, by one estimate. In response to these trends, executives must do a better job of filtering input, and should give more weight to the views of investors with a longer-term, buy-and-hold orientation.

If they don’t, short-term capital will beget short-term management through a natural chain of incentives and influence. If CEOs miss their quarterly earnings targets, some big investors agitate for their removal. As a result, CEOs and their top teams work overtime to meet those targets. The unintended upshot is that they manage for only a small portion of their firm’s value. When McKinsey’s finance experts deconstruct the value expectations embedded in share prices, we typically find that 70% to 90% of a company’s value is related to cash flows expected three or more years out. If the vast majority of most firms’ value depends on results more than three years from now, but management is preoccupied with what’s reportable three months from now, then capitalism has a problem.

Roughly 70% of all U.S. equities trading is now done by “hyperspeed” traders—some of whom hold stocks for only a few seconds.

Some rightly resist playing this game. Unilever, Coca-Cola, and Ford, to name just a few, have stopped issuing earnings guidance altogether. Google never did. IBM has created five-year road maps to encourage investors to focus more on whether it will reach its long-term earnings targets than on whether it exceeds or misses this quarter’s target by a few pennies. “I can easily make my numbers by cutting SG&A or R&D, but then we wouldn’t get the innovations we need,” IBM’s CEO, Sam Palmisano, told us recently. Mark Wiseman, executive vice president at the Canada Pension Plan Investment Board, advocates investing “for the next quarter century,” not the next quarter. And Warren Buffett has quipped that his ideal holding period is “forever.” Still, these remain admirable exceptions.

To break free of the tyranny of short-termism, we must start with those who provide capital. Taken together, pension funds, insurance companies, mutual funds, and sovereign wealth funds hold $65 trillion, or roughly 35% of the world’s financial assets. If these players focus too much attention on the short term, capitalism as a whole will, too.

In theory they shouldn’t, because the beneficiaries of these funds have an obvious interest in long-term value creation. But although today’s standard practices arose from the desire to have a defensible, measurable approach to portfolio management, they have ended up encouraging shortsightedness. Fund trustees, often advised by investment consultants, assess their money managers’ performance relative to benchmark indices and offer only short-term contracts. Those managers’ compensation is linked to the amount of assets they manage, which typically rises when short-term performance is strong. Not surprisingly, then, money managers focus on such performance—and pass this emphasis along to the companies in which they invest. And so it goes, on down the line.

Only 45% of those surveyed in the U.S. and the UK expressed trust in business. This stands in stark contrast to developing countries: For example, the figure is 61% in China, 70% in India, and 81% in Brazil.

As the stewardship advocate Simon Wong points out, under the current system pension funds deem an asset manager who returns 10% to have underperformed if the relevant benchmark index rises by 12%. Would it be unthinkable for institutional investors instead to live with absolute gains on the (perfectly healthy) order of 10%—especially if they like the approach that delivered those gains—and review performance every three or five years, instead of dropping the 10-percenter? Might these big funds set targets for the number of holdings and rates of turnover, at least within the “fundamental investing” portion of their portfolios, and more aggressively monitor those targets? More radically, might they end the practice of holding thousands of stocks and achieve the benefits of diversification with fewer than a hundred—thereby increasing their capacity to effectively engage with the businesses they own and improve long-term performance? Finally, could institutional investors beef up their internal skills and staff to better execute such an agenda? These are the kinds of questions we need to address if we want to align capital’s interests more closely with capitalism’s.

2. Serve Stakeholders, Enrich Shareholders

The second imperative for renewing capitalism is disseminating the idea that serving stakeholders is essential to maximizing corporate value. Too often these aims are presented as being in tension: You’re either a champion of shareholder value or you’re a fan of the stakeholders. This is a false choice.

The inspiration for shareholder-value maximization, an idea that took hold in the 1970s and 1980s, was reasonable: Without some overarching financial goal with which to guide and gauge a firm’s performance, critics feared, managers could divert corporate resources to serve their own interests rather than the owners’. In fact, in the absence of concrete targets, management might become an exercise in politics and stakeholder engagement an excuse for inefficiency. Although this thinking was quickly caricatured in popular culture as the doctrine of “greed is good,” and was further tarnished by some companies’ destructive practices in its name, in truth there was never any inherent tension between creating value and serving the interests of employees, suppliers, customers, creditors, communities, and the environment. Indeed, thoughtful advocates of value maximization have always insisted that it is long-term value that has to be maximized.

Capitalism’s founding philosopher voiced an even bolder aspiration. “All the members of human society stand in need of each others assistance, and are likewise exposed to mutual injuries,” Adam Smith wrote in his 1759 work, The Theory of Moral Sentiments. “The wise and virtuous man,” he added, “is at all times willing that his own private interest should be sacrificed to the public interest,” should circumstances so demand.

Smith’s insight into the profound interdependence between business and society, and how that interdependence relates to long-term value creation, still reverberates. In 2008 and again in 2010, McKinsey surveyed nearly 2,000 executives and investors; more than 75% said that environmental, social, and governance (ESG) initiatives create corporate value in the long term. Companies that bring a real stakeholder perspective into corporate strategy can generate tangible value even sooner. (See the sidebar “Who’s Getting It Right?”)

Creating direct business value, however, is not the only or even the strongest argument for taking a societal perspective. Capitalism depends on public trust for its legitimacy and its very survival. According to the Edelman public relations agency’s just-released 2011 Trust Barometer, trust in business in the U.S. and the UK (although up from mid-crisis record lows) is only in the vicinity of 45%. This stands in stark contrast to developing countries: For example, the figure is 61% in China, 70% in India, and 81% in Brazil. The picture is equally bleak for individual corporations in the Anglo-American world, “which saw their trust rankings drop again last year to near-crisis lows,” says Richard Edelman.

How can business leaders restore the public’s trust? Many Western executives find that nothing in their careers has prepared them for this new challenge. Lee Scott, Walmart’s former CEO, has been refreshingly candid about arriving in the top job with a serious blind spot. He was plenty busy minding the store, he says, and had little feel for the need to engage as a statesman with groups that expected something more from the world’s largest company. Fortunately, Scott was a fast learner, and Walmart has become a leader in environmental and health care issues.

Tomorrow’s CEOs will have to be, in Joseph Nye’s apt phrase, “tri-sector athletes”: able and experienced in business, government, and the social sector. But the pervading mind-set gets in the way of building those leadership and management muscles. “Analysts and investors are focused on the short term,” one executive told me recently. “They believe social initiatives don’t create value in the near term.” In other words, although a large majority of executives believe that social initiatives create value in the long term, they don’t act on this belief, out of fear that financial markets might frown. Getting capital more aligned with capitalism should help businesses enrich shareholders by better serving stakeholders.

3. Act Like You Own the Place

As the financial sector’s troubles vividly exposed, when ownership is broadly fragmented, no one acts like he’s in charge. Boards, as they currently operate, don’t begin to serve as a sufficient proxy. All the Devils Are Here, by Bethany McLean and Joe Nocera, describes how little awareness Merrill Lynch’s board had of the firm’s soaring exposure to subprime mortgage instruments until it was too late. “I actually don’t think risk management failed,” Larry Fink, the CEO of the investment firm BlackRock, said during a 2009 debate about the future of capitalism, sponsored by the Financial Times. “I think corporate governance failed, because…the boards didn’t ask the right questions.”

What McKinsey has learned from studying successful family-owned companies suggests a way forward: The most effective ownership structure tends to combine some exposure in the public markets (for the discipline and capital access that exposure helps provide) with a significant, committed, long-term owner. Most large public companies, however, have extremely dispersed ownership, and boards rarely perform the single-owner-proxy role. As a result, CEOs too often listen to the investors (and members of the media) who make the most noise. Unfortunately, those parties tend to be the most nearsighted ones. And so the tyranny of the short term is reinforced.

The answer is to renew corporate governance by rooting it in committed owners and by giving those owners effective mechanisms with which to influence management. We call this ownership-based governance, and it requires three things:

Just 43% of the nonexecutive directors of public companies believe they significantly influence strategy. For this to change, board members must devote much more time to their roles.

More-effective boards.

In the absence of a dominant shareholder (and many times when there is one), the board must represent a firm’s owners and serve as the agent of long-term value creation. Even among family firms, the executives of the top-performing companies wield their influence through the board. But only 43% of the nonexecutive directors of public companies believe they significantly influence strategy. For this to change, board members must devote much more time to their roles. A government-commissioned review of the governance of British banks last year recommended an enormous increase in the time required of nonexecutive directors of banks—from the current average, between 12 and 20 days annually, to between 30 and 36 days annually. What’s especially needed is an increase in the informal time board members spend with investors and executives. The nonexecutive board directors of companies owned by private equity firms spend 54 days a year, on average, attending to the company’s business, and 70% of that time consists of informal meetings and conversations. Four to five days a month obviously give a board member much greater understanding and impact than the three days a quarter (of which two may be spent in transit) devoted by the typical board member of a public company.

Boards also need much more relevant experience. Industry knowledge—which four of five nonexecutive directors of big companies lack—helps boards identify immediate opportunities and reduce risk. Contextual knowledge about the development path of an industry—for example, whether the industry is facing consolidation, disruption from new technologies, or increased regulation—is highly valuable, too. Such insight is often obtained from experience with other industries that have undergone a similar evolution.

In addition, boards need more-effective committee structures—obtainable through, for example, the establishment of a strategy committee or of dedicated committees for large business units. Directors also need the resources to allow them to form independent views on strategy, risk, and performance (perhaps by having a small analytical staff that reports only to them). This agenda implies a certain professionalization of nonexecutive directorships and a more meaningful strategic partnership between boards and top management. It may not please some executive teams accustomed to boards they can easily “manage.” But given the failures of governance to date, it is a necessary change.

More-sensible CEO pay.

An important task of governance is setting executive compensation. Although 70% of board directors say that pay should be tied more closely to performance, CEO pay is too often structured to reward a leader simply for having made it to the top, not for what he or she does once there. Meanwhile, polls show that the disconnect between pay and performance is contributing to the decline in public esteem for business.

Companies should create real risk for executives.Some experts privately suggest mandating that new executives invest a year’s salary in the company.

CEOs and other executives should be paid to act like owners. Once upon a time we thought that stock options would achieve this result, but stock-option- based compensation schemes have largely incentivized the wrong behavior. When short-dated, options lead to a focus on meeting quarterly earnings estimates; even when long-dated (those that vest after three years or more), they can reward managers for simply surfing industry- or economy-wide trends (although reviewing performance against an appropriate peer index can help minimize free rides). Moreover, few compensation schemes carry consequences for failure—something that became clear during the financial crisis, when many of the leaders of failed institutions retired as wealthy people.

There will never be a one-size-fits-all solution to this complex issue, but companies should push for change in three key areas:

• They should link compensation to the fundamental drivers of long-term value, such as innovation and efficiency, not just to share price.

• They should extend the time frame for executive evaluations—for example, using rolling three-year performance evaluations, or requiring five-year plans and tracking performance relative to plan. This would, of course, require an effective board that is engaged in strategy formation.

• They should create real downside risk for executives, perhaps by requiring them to put some skin in the game. Some experts we’ve surveyed have privately suggested mandating that new executives invest a year’s salary in the company.

Redefined shareholder “democracy.”

The huge increase in equity churn in recent decades has spawned an anomaly of governance: At any annual meeting, a large number of those voting may soon no longer be shareholders. The advent of high-frequency trading will only worsen this trend. High churn rates, short holding periods, and vote-buying practices may mean the demise of the “one share, one vote” principle of governance, at least in some circumstances. Indeed, many large, top-performing companies, such as Google, have never adhered to it. Maybe it’s time for new rules that would give greater weight to long-term owners, like the rule in some French companies that gives two votes to shares held longer than a year. Or maybe it would make sense to assign voting rights based on the average turnover of an investor’s portfolio. If we want capitalism to focus on the long term, updating our notions of shareholder democracy in such ways will soon seem less like heresy and more like common sense.

While I remain convinced that capitalism is the economic system best suited to advancing the human condition, I’m equally persuaded that it must be renewed, both to deal with the stresses and volatility ahead and to restore business’s standing as a force for good, worthy of the public’s trust. The deficiencies of the quarterly capitalism of the past few decades were not deficiencies in capitalism itself—just in that particular variant. By rebuilding capitalism for the long term, we can make it stronger, more resilient, more equitable, and better able to deliver the sustainable growth the world needs. The three imperatives outlined above can be a start along this path and, I hope, a way to launch the conversation; others will have their own ideas to add.

The kind of deep-seated, systemic changes I’m calling for can be achieved only if boards, business executives, and investors around the world take responsibility for bettering the system they lead. Such changes will not be easy; they are bound to encounter resistance, and business leaders today have more than enough to do just to keep their companies running well. We must make the effort regardless. If capitalism emerges from the crisis vibrant and renewed, future generations will thank us. But if we merely paper over the cracks and return to our precrisis views, we will not want to read what the historians of the future will write. The time to reflect—and to act—is now.


Please see my other related posts.

Business Investments and Low Interest Rates

Mergers and Acquisitions – Long Term Trends and Waves



Key sources of Research:

Secular stagnation and low investment: Breaking the vicious cycle—a discussion paper



Case Still Out on Whether Corporate Short-Termism Is a Problem

Larry Summers


Where companies with a long-term view outperform their peers



How short-term thinking hampers long-term economic growth



Anthony Hilton: Short-term thinking hits nations as a whole, not just big business


Short-termism in business: causes, mechanisms and consequences

EY Poland Report


Overcoming the Barriers to Long-term Thinking in Financial Markets

Ruth Curran and Alice Chapple
Forum for the Future


Understanding Short-Termism: Questions and Consequences


Ending Short-Termism : An Investment Agenda for Growth


The Short Long

Speech by
Andrew G Haldane, Executive Director, Financial Stability, and Richard Davies

Brussels May 2011


Capitalism for the Long Term

Dominic Barton

From the March 2011 Issue


Quarterly capitalism: The pervasive effects of short-termism and austerity


Is Short-Term Behavior Jeopardizing the Future Prosperity of Business?


Andrew G Haldane: The short long

Speech by Mr Andrew Haldane, Executive Director, Financial Stability, and Mr Richard
Davies, Economist, Financial Institutions Division, Bank of England,
at the 29th Société
Universitaire Européene de Recherches Financières Colloquium,
Brussels, 11 May 2011



Jesse M. Fried


The fringe economic theory that might get traction in the 2016 campaign


FCLT Global:  Focusing Capital on the Long Term



Finally, Evidence That Managing for the Long Term Pays Off

Dominic Barton

James Manyika

Sarah Keohane Williamson

February 07, 2017 UPDATED February 09, 2017


Focusing Capital on the Long Term

Dominic Barton

Mark Wiseman

From the January–February 2014 Issue

Is Corporate Short-Termism Really a Problem? The Jury’s Still Out

Lawrence H. Summers

February 16, 2017

Yes, Short-Termism Really Is a Problem

Roger L. Martin

October 09, 2015

Long-Termism or Lemons

The Role of Public Policy in Promoting Long-Term Investments

By Marc Jarsulic, Brendan V. Duke, and Michael Madowitz October 2015

Center for American Progress



Overcoming Short-termism: A Call for A More Responsible Approach to Investment and Business Management




Focusing capital on the Long Term

Jean-Hugues Monier – Senior Parter – McKinsey & Company

Princeton University – November 2016


Economics of Money, Credit and Debt

Economics of Money, Credit and Debt

Global Financial Crisis and subsequent Global recession ( Secular Stagnation) has invoked lot of research in the causes of GFC.  Post Keynesian Economists were particularly correct about predicting the GFC.  Main stream Neoclassical Economists and their DSGE models did not predict the crisis.  Great Moderation was the main explanation given by neoclassical economists.  Low volatility in economic growth was seen as calm waters with no turbulence ahead.  GFC proved them wrong.

There are several development prior to GFC.

  • Role of Financial Sector
  • Rise of Credit and Debt
  • Rise of Shadow Banking
  • Securitization
  • Financial Globalization
  • Income Inequality
  • Lowered Credit standards
  • Lowered ratings standards by Rating Agencies
  • Global Capital flows

There are several outstanding researchers who are developing new ideas and thinking about the Banks, Money, Credit and Debt, Shadow Banking, Income Inequality, Effective demand, Low Interest Rates, Endogenous money and others.

  • Hierarchy of Money and Credit
  • Institutionalism
  • Accounting Approach
  • Quadruple Entry system
  • Endogenous Sources of Instability
  • Credit is debt 
  • Inherent Instability of Credit
  • Endogenous Creation of Money
  • Effective Demand
  • Lender of Last Resort
  • Open Economies
  • Interlinkages among economic agents 
  • Effectiveness of Monetary Policies
  • Federal Reserve Open Market operations
  • Shadow Banking
  • Fiscal Policies
  • Global Coordination and Cooperation
  • International Lender of Last Resort
  • Swap Network Among Central Banks
  • Regulation of Banks
  • Liquidity and Solvency
  • Capital, Reserve, Liquidity Ratios
  • Capital Flows across borders
  • Linkages among Financial Markets
  • Cross border Spillovers
  • Impact of Low Interest Rates
  • Stock flow Consistency
  • Essential Hybridity ( Public vs Private Money, Local vs Global )
  • Interdependence among Markets, Institutions and Market Infrastructure
  • Payment, clearing and Settlement Systems
  • Interlinked Balancesheets, Credit Chains, Repo Chains


Key People:

  • Steve Keen
  • Marc Lavoie
  • Dirk Bezemer
  • Richard Werner
  • Perry Mehrling
  • Hyun Song Shin

Also see

  • Richard Koo
  • Adair Turner
  • Gennaro  Zezza
  • Wynn Godley
  • Hyman Minsky
  • Zoltan Pozsar
  • Claudio Borio


Key Sources of Research:


The Inherent Hierarchy of Money

Perry Mehrling

January 25, 2012





Economics of Credit and Debt

Daniel H. Neilson†

18 November 2012





The New Lombard Street How the Fed became the dealer of last resort

Perry Mehrling April 4, 2010





Why central banking should be re-imagined

Perry Mehrling





A Money View of Credit and Debt

November 4, 2012

Perry Mehrling




Why is money difficult?

Perry Mehrling

BCRA, Buenos Aires

June 4, 2015





Central Bank Deleveraging and Financial Sector Regulation

Perry Mehrling

Minsky Conference, DC

April 15, 2015




Modern Money: Fiat or Credit?

Author(s): Perry Mehrling
Source: Journal of Post Keynesian Economics, Vol. 22, No. 3 (Spring, 2000), pp. 397-406





Shadow Banking, Central Banking, and the Future of Global Finance

Perry Mehrling

Shadow Banking: A European Perspective City University London
Feb 2, 2013




Five Key Features of Modern Monetary Systems

New Thinking in Finance, London February 12, 2014

Perry Mehrling





Elasticity and Discipline in the Global Swap Network

Perry Mehrling1∗

Working Paper No. 27 November 12, 2015





The Credit Money and State Money Approaches

L. Randall Wray

Working Paper No. 32

April 2004





Bagehot was a Shadow Banker:
Shadow Banking, Central Banking, and the Future of Global Finance

Perry Mehrling, Zoltan Pozsar, James Sweeney, Daniel H. Neilson

February 22, 2013





The rise of asset management and capital market-based financing: a cyclical or a structural shift?

Perry Mehrling

ECMI, Brussels October 20, 2015






Credit theory of money




The Credit Theory of Money

By A. Mitchell Innes

From The Banking Law Journal, Vol. 31 (1914), Dec./Jan., Pages 151-168.






From The Banking Law Journal, May 1913.




Schumpeter Might Be Right Again: The Functional Differentiation of Credit


Dirk J. Bezemer





The post-Keynesian economics of credit and debt

Marc Lavoie
Department of Economics, University of Ottawa

November 2012






The role of State and the Hierarchy of Money

Stephanie Bell






Stephanie Bell






Towards a theory of shadow money

Daniela Gabor and Jakob Vestergaard




The economic consequences of “market-based” lending

Carolyn Sissoko

May 24, 2016




Money creation in the modern economy

Michael McLeay, Amar Radia and Ryland Thomas





Money in the modern economy: an introduction

Michael McLeay, Amar Radia and Ryland Thomas




Banks are not intermediaries of loanable funds — and why this matters

Zoltan Jakab  and Michael Kumhof




Where Does Money Come From?






Explaining money creation by commercial banks: Five analogies for public education


Ib Ravn




The Truth about Banks 

Michael Kumhof and Zoltán Jakab






How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking 

Richard A. Werner





Can banks individually create money out of nothing? — The theories and the empirical evidence 

Richard A. Werner




A lost century in economics: Three theories of banking and the conclusive evidence

Richard A. Werner





Money and credit as means of payment: A new monetarist approach 

Sébastien Lotza, , Cathy Zhang




Head and Tail of Money Creation and its System Design Failures

– Toward the Alternative System Design


Kaoru Yamaguchi, Ph.D.

Yokei Yamaguchi




Applying the Quantity Theory of Credit: The role of the ECB in the propagation of the European financial and sovereign debt crisis and the policy implications

Professor Richard A. Werner




Towards a New Research Programme on ‘Banking and the Economy

Implications of the Quantity Theory of Credit for the Prevention and Resolution of Banking and Debt Crises

Richard A. Werner










The Quantity Theory of Credit and Some of its Applications

Richard Werner





Banks As Social Accountants And Social Controllers: Credit and Crisis in Historical Perspective

Dirk J Bezemer






Adair Turner






Towards a New Monetary Paradigm: A Quantily Theorem of Disaggregated Credit evidence from Japan

Richard A. Werner






Do shadow Banks Create Money?

Jo Michell






The political economy of repo markets

Daniela Gabor



Bezemer, Dirk J.



“This is Not a Credit Crisis–It is a Debt Crisis.”

Economic Affairs 29.3 (2009): 95-97.




Explaining the Great Moderation: Credit and the Macroeconomy Revisited

D Bezemer






Understanding financial crisis through accounting models

Dirk J. Bezemer






“No One Saw This Coming”

Understanding Financial Crisis Through Accounting Models*

Dirk J Bezemer




Credit In Current Orthodoxy: An Appraisal

Dirk J Bezemer




From Boom to Bust in the Credit Cycle: the Role of Mortgage Credit


September 4, 2014




A Monetary Minsky model of the Great Moderation and the Great Recession

Steve Keen





Balance Sheet Recession as the Other-Half of Macroeconomics

Richard C. Koo

Chief Economist Nomura Research Institute

October 14, 2012

The World in Balance Sheet Recession: What Post-2008 West Can Learn from Japan 1990-2005


Richard C. Koo Chief Economist

Central Banks in Balance Sheet Recessions: A Search for Correct Response


Richard C. Koo

Chief Economist Nomura Research Institute

March 31, 2013












wynne godley and gennaro zezza






Are Housing Prices, Household Debt, and Growth Sustainable?
Dimitri B. Papadimitriou  Edward Chilcote  Gennaro Zezza

January 2006





How Fragile is the U.S. Economy?





Low Interest Rates and Risk taking channel of Monetary Policy

From Monetary Policy and Bank Risk Taking

Gianni De Nicolò, Giovanni Dell’Ariccia, Luc Laeven, and Fabian Valencia
July 27, 2010

Part of the blame for the current global financial crisis has fallen, justly or not, on monetary policy. The story goes more or less like this: persistently low real interest rates fueled a boom in asset prices and securitized credit and led financial institutions to take on increasing risk and leverage. Had central banks preempted this buildup of risk by raising interest rates earlier and more aggressively, the consequences of the burst would have been much less severe.1

This claim has become increasingly popular in both academia and the business press, partly because the crisis occurred in the wake of a prolonged period of exceptionally low interest rates and lax liquidity conditions. However, little empirical evidence has been presented to back it up. And theory has had surprisingly little to offer on the subject. Few macroeconomic models have explicitly considered the impact of policy rates on bank risk taking. And models of bank risk taking have yet to incorporate the effects of monetary policy.

From The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

A recent line of research suggests that there is a significant link between a monetary policy of low interest rates over an extended period of time and higher risk-taking by banks. This link points to a different dimension of the monetary transmission mechanism, the so-called risk-taking channel of monetary policy transmission (Borio and Zhu, 2008)

From The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

For many decades commercial banks in the USA operated under a very restrictive regulatory environment. The McFadden Act (1927) restricted commercial banks from intra- and inter-state expansion of their branch network without previous regulatory approval. Furthermore, the Glass- Steagall Act (1933) prohibited, among other things, commercial banks from offering investment services, such as corporate underwriting, securities brokerage, real estate sales or insurance. These Acts meant to increase competition, protect small banks and limit their risk-taking behavior. Eventually, both Acts were repealed by the end of the 1990s; this allowed commercial banks to freely expand their network across counties and states and to join their forces with other financial institutions. Whether the removal of these restrictions on US banking activity has led to a decrease or increase in banks’ risk-taking behavior is an open debate in economic research. Mishkin (1999), for example, argues that the separation of the banking and securities industries restricted the ability of the banks to diversify, and thus to reduce risk. Then again, the demise of the Glass-Steagall Act led to large financial institutions and the well-known moral hazard problem created by a too-big-to- fail policy. This policy seems to have encouraged increased risk taking on the part of large US banks (Boyd and Gertler, 1993).

From The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

Regardless its (questionable) impact on banks’ risk-taking behavior, the fact is that financial deregulation significantly reduced the number of insured US commercial banks from over 14,000 in 1985 to approximately 6,500 in 2010. At the same time, banking industry assets increased significantly from $2.73 trillion in 1985 to $12.1 trillion in 2010. However, this increase was not evenly distributed across the US banking industry and the sector became far more concentrated than during most of its past. For example, the asset share of the largest size group (i.e. organizations with more than $1 billion in assets) rose dramatically from 71% in 1992 to 90% in 2010.

From The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

In this paper, we do not investigate the underlying factors of this consolidation trend. Instead, our focus is primarily on identifying how the gradual restructuring of the US banking industry (in its various manifestations), along with the varying macroeconomic conditions, have influenced the linkage between interest rates and bank risk-taking over time. Hence, adding a temporal dimension to the analysis allows us to better understand the dynamics of the risk-taking channel of the US monetary policy transmission over the last two decades. Throughout this period, the federal funds rate (the primary tool used for implementing monetary policy) varied significantly in accordance with the country’s economic conditions. During the 2000s, the Fed adopted accommodative monetary policies. Following the bursting of the dotcom bubble in late 2000 and the subsequent recession in the US economy, the Federal Open Market Committee (FOMC) began to lower the target for the overnight federal funds rate. Rates fell from 6.5% in late 2000 to 1.75% in December 2001 and to 1% in June 2003. The target rate was left at about 1% for a year. At that time, the historically low federal funds rate resulted in a negative real federal funds rate from November 2002 to August 2005. Remarkably, since the first quarter of 2009 the level of federal funds rate has remained at its all-time low (0.25%). This exceptionally low level is likely to hold for an extended period of time as evidenced by the minutes of the FOMC’s meeting April 27, 2011.

From The risk-taking channel of monetary policy in the USA: Evidence from micro-level data


In forming its central-bank policy rates, the Fed, like other central banks, has the mandate of promoting price stability. However, unlike other banks, the Fed is additionally charged with promoting maximum employment. This dual mandate may well explain the Fed’s recent decision to embark on quantitative easing schemes in an attempt to keep interest rates at low levels in order to promote employment. Although these monetary policy decisions may potentially impair the performance of the banking sector, or change the structure of its risk-taking activities, the Fed avoids taking actions against financial volatility per se, or against banks taking losses or failing. Such actions are believed to raise moral hazard problems, which could ultimately increase, rather than reduce, the risks to the financial system (Plosser, 2007). Thus, the current (and expected) accommodative monetary policy implies that the Fed is more concerned with liquidity injections that facilitate the orderly functioning of the financial markets, rather than protecting banks from the consequences of their financial choices.

Key Research/Analysis Sources:

A) Monetary policy, interest rates and risk-taking

Mikael apel and Carl andreas Claussen; 2012




B) Monetary Policy and Bank Risk-Taking: Evidence from the Corporate Loan Market

Teodora Paligorova∗ Bank of Canada

Jo ̃ao A. C. Santos∗

November 22, 2012


http://www.frbsf.org/economic-research/events/2013/january/federal-reserve-day-ahead-financial-markets institutions/files/Session_3_Paper_2_Paligorova_Santos_risk_taking.pdf


C) Monetary policy and the risk-taking channel 

Leonardo Gambacorta
Bank for International Settlements (BIS)

BIS Quarterly Review December 2009



D) Capital Flows and the Risk-Taking Channel of Monetary Policy

Valentina Bruno Hyun Song Shin

December 19, 2012




E) Bank Risk-Taking, Securitization, Supervision, and Low Interest Rates: Evidence from Lending Standards

Angela Maddaloni and José-Luis Peydró

September 2009



F) Capital regulation, Risk-Taking and Monetary Policy: A Missing Link in the Transmission Mechanism ?

24-25 September 2009

Claudio Borio

Haibin Zhu



G) Monetary Policy and Bank Risk Taking

Prepared by Gianni De Nicolò, Giovanni Dell’Ariccia, Luc Laeven, and Fabian Valencia* Authorized for Distribution by Olivier Blanchard
July 27, 2010



H) Conducting Monetary Policy at Very Low Short-Term Interest Rates


MAy 2004



I) Does Monetary Policy Affect Bank Risk?

Yener Altunbasa, Leonardo Gambacortab, and David Marques-Ibanezc

March 2014



J) Interest rates and bank risk-taking

Manthos D Delis and Georgios Kouretas

January 2010



K) Monetary Policy, Leverage, and Bank Risk-Taking

Giovanni Dell’Ariccia Luc Laeven Robert Marquez

December 2010



L) The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

Manthos D Delis and Iftekhar Hasan and Nikolaos Mylonidis

October 2011




M) Bank Leverage and Monetary Policy’s Risk-Taking Channel: Evidence from the United States



N) Money, Liquidity, and Monetary Policy

Tobias Adrian Hyun Song Shin

January 2009


O) In search for yield?
Survey-based evidence on bank risk taking

Claudia M. Buch

Sandra Eickmeier

Esteban Prieto






by Yener Altunbas, Leonardo Gambacorta and David Marqués-Ibáñez




Q) Monetary policy and the risk-Taking channel: Insights from the lending behaviour of banks

Teodora Paligorova and Jesus A. Sierra Jimenez




Impact of Low Interest Rates on Bank’s Profitability

What is Impact of Low Interest rates on Banks’ profitability?

Fed reserve sets the monetary policy for improving employment and controlling inflation. Policy is implemented through setting up policy interest rates.

I point you to three charts below:

Effective Fed funds rate (EFFR). This rate, with high of more than 19 percent in 1981, is at 0.37 percent at present. In November 2008, the rate was at 0.39 percent and has remained low since then.  See reference (m).

Net Interest Margin of Banks has declined: Over the years, the NIM (Net Interest Margin) of banks, a measure of profitability, has eroded. Erosion continues. See the chart below reference (a).

Number of Banks in USA have declined: There were 14400 banks in 1984, 7175 in 2008, and now in 2016, there are only 5309 banks. Banks continue to fail/consolidate (M&A). See the chart below.  reference (b).


What does give rise to institutional cash pools and shadow banking, financial innovation (securitization), Bank failures, consolidation (M&A) and evolution of Too Big to Fail Banks, risk taking in lending and financial instability?  Rise in Debt, Credit and Capital Flows?

Too low interest rates for too long.


Here are some of the recent publications voicing their concerns:

2015 Annual Report of US Office of Financial Research (OFR) says:

OFR’s assessment of threats to the financial stability of the United States, discusses risk and resilience in the financial system.

The three chief threats are the: (1) impact of persistently low interest rates, (2) increasing debt and declining credit quality in U.S. corporations and emerging markets overseas, and (3) areas of weakness in the system that remain despite financial reforms and better risk management by financial companies. (page 5)

Long-term impact of low interest rates – Although some interest rates have recently moved higher, given the context just described, we expect the incentives for risk-taking from historically low interest rates to endure for some time.

Persistently low rates will continue to prompt investors to take higher risks to increase their returns on investment and may encourage excessive borrowing. (page 6)

At the media briefing of BIS Quarterly Review March 2016, On-the-record remarks by Mr Claudio Borio, Head of the Monetary and Economic Department, 4 March 2016.

But the main source of anxiety was the vision of a future with even lower interest rates, well beyond the horizon, that could cripple banks’ margins, profitability and resilience.


BIS views are shaped by the new research published in a paper. See reference (g).


Banks stocks are traded on wall street. The CEOS of banks are responsible to show revenue growth and earnings growth every quarter. How do they accomplish that in declining margins environment?

Risk taking, leverage, financial innovation, non-core business, industry consolidation, and aggressive accounting.


Fed policies to improve the real economy impact the banking/financial sector adversely.

I suggest that it was due to declining Interest rates in last thirty years that we had Global Financial Crisis.


Please take a look at latest data and research/analysis references below.

  1. Stijn Claessens, Nicholas Coleman, and Michael Donnelly, “‘Low-for-Long’ Interest Rates and Net Interest Margins of Banks in Advanced Foreign Economies,” Federal Reserve Board of Governors International Finance Discussion Papers Notes, April 11, 2016.
  2. Deutsche Bundesbank: Banks’ Net Interest Margin and the Level of Interest Rates; July 2015
  3. Atlanta Fed: Net Interest Margin Performance in a Low-Rate Environment 2012
  4. Richmond Fed: Do Net Interest Margins and Interest Rates Move Together? May 2016
  5. BIS: The influence of monetary policy on bank profitability October 2015
  6. FRB: Why are net interest margins of large banks so compressed ? October 2015
  7. Chicago Fed: What Is the Impact of a Low Interest Rate Environment on Bank Profitability? July 2014
  8. St.Louis Fed: Are Banks More Profitable When Interest Rates Are High or Low? May 2016
  9. Bank of England, UK: Simple banking: profitability and the yield curve June 2012


Key data and analysis sources:


a) Net Interest Margin for all U.S. Banks



b) Commercial Banks in the U.S.



c) Deutsche Bundesbank (German Central Bank): Banks’ Net Interest Margin and the Level of Interest Rates  July 2015



d) Stijn Claessens, Nicholas Coleman, and Michael Donnelly, “‘Low-for-Long’ Interest Rates and Net Interest Margins of Banks in Advanced Foreign Economies,” Federal Reserve Board of Governors International Finance Discussion Papers Notes, April 11, 2016.



e) Atlanta Fed: Net Interest Margin Performance in a Low-Rate Environment; Viewpoint Vol 25/4, 4th quarter, 2012



f) Richmond Fed: Do Net Interest Margins and Interest Rates Move Together?; Economic Brief No. 16-05, May 2016



g) BIS: The influence of monetary policy on bank profitability; October 2015



h) OFR Annual Report 2015



i) BIS Quarterly Review March 2016 – Media Briefing



j) FRB: Why are net interest margins of large banks so compressed ?; Feds Notes October 2015



k) Chicago FedWhat Is the Impact of a Low Interest Rate Environment on Bank Profitability?; Chicago Fed Letters, No. 324, July 2014



l) St.Louis Fed: Are Banks More Profitable When Interest Rates Are High or Low?; On the Economy, May 16, 2016



m) Effective Fed Funds Rate



n) Bank of England, UK: Simple banking: profitability and the yield curve; Piergiorgio Alessandri and Benjamin Nelson; June 2012