Benign neglect of NIMs in the US

Central bankers in Europe have been thinking a lot about The Death of Banks lately. Not so much in the US.
There’s good reason for that, of course. Europe has been bleeding out banks with negative rates, so policy makers there have become painfully awa…

Central bankers in Europe have been thinking a lot about The Death of Banks lately. Not so much in the US.

There's good reason for that, of course. Europe has been bleeding out banks with negative rates, so policy makers there have become painfully aware of the banks' role implementing monetary policy.

The US Federal Reserve, on the other hand, has been keeping banks alive with a steady drip of interest on excess reserves, or IOER, to control rates in a financial system awash with liquidity. The Fed's releasing a policy statement today (we understand if you forgot about that in the heli-frenzy before the BoJ on Friday).

Of course, keeping banks on life support with IOER doesn't help net interest margins. NIM is a key measure of bank profitability. It's also closely tied to the US yield curve -- which is unfortunate for banks, because that sucker has been positively steamrolled lately by the combination of low yields abroad, low inflation expectations and rising US policy rates.

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