zeb.market.flash. Issue #41: Soaring interest rates in turbulent times
Our overview of current developments in the global banking market
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Issue 41 | Juli 29, 2022 | The era of zero interest rate levels seems to be over
- The rapid and strong increases in market rates over the past months have put instantaneous pressure on capital markets, both equity and bond markets, and thus have led to painful losses in the portfolios of the investors, including banks.
- Consequently, banks with a high share of proprietary investments will experience noticeable cuts in their valuation results for 2022.
- Of course, with higher interest rates, banks will be able to earn more money again in the longer term. This effect will obviously be influenced by the structure of banks’ balance sheets but also de-pends on the extent to which banks pass on higher rates to their customers.
- On the one hand, customers are looking to reap higher yields from their deposits, and banks should be inclined to grant higher interests on deposits. This competition for deposits might lead to an erosion of the potential profits.
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