Negative interest rates squeeze deposit-dependent banks, impacting overall net interest margin.
The negative interest rate policy in the euro area has caused banks to struggle with their interest rate margins. Banks relying more on deposits have seen a decrease in their funding margins, as they are hesitant to lower interest rates on household deposits below zero. These banks have not been able to make up for this loss by increasing their lending margins. As a result, deposit-dependent banks have experienced a significant reduction in their overall net interest margin compared to other banks.