Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

Negative interest rates are, in theory, bad news for all banks, turning the business of charging borrowers and rewarding depositors on its head. But CEOs, already grappling with market turmoil, can't simply blame policy makers. 

Sinking Banks
Shares of European lenders have tumbled over the past five years
Source: Bloomberg data

As damaging as rock-bottom rates have been to average net interest income in the euro zone, and with the European Central Bank threatening to take the deposit rate deeper into negative territory, it's hard to say that banks have been powerless to cope. A look at individual banks in countries with negative rates, from the euro area to Switzerland and Scandinavia, shows the damage has been far from widespread.

Some banks have even managed to increase, not just protect, margins.

Under Rated
Net interest margins at banks in negative-rate countries
Source: Bloomberg data

The only hitch is that rather than making bank credit cheaper, as policy makers intended, negative rates may encourage banks to raise the cost of borrowing where they can -- as well as other services they provide.

So how is it that some banks are able to dull the pain of negative rates?

The first answer is to look for ways to pass on the cost to clients, especially where demand for loans is healthy. Scandinavian lender Swedbank has been able to increase mortgage rates amid a booming housing market. Swiss lenders, too, have benefited from raising the cost of home loans.

If demand for loans is sluggish, though, banks might have more luck passing on higher costs to depositors. Lenders like France's Credit Agricole could start to pare the relatively generous rates they offer depositors. Or more lenders could start charging more for items like debit cards and overdrafts.

Then you can change your business model. An environment of zero or negative rates tends to make higher-yielding investment products more attractive, which is good if you can offer them. That's helped firms like Credit Suisse and UBS, which both have substantial private banking and wealth management arms. It's also encouraging Italian banks like Intesa Sanpaolo to expand their offer customers higher-yielding products.

So if these are the winners, who are the losers? It just might be the German banks. Their home economy is strong, but they are awash with deposits and are the biggest hoarders of cash with the European Central Bank -- which is where the instant pain of deposit-rate cuts is felt. Deutsche Bank's former co-CEO Juergen Fitschen warned as long ago as 2013 that negative rates would penalize banks that were limiting lending for reasons he saw as sensible.

Negative rates are not going to revive investor appetite for European banks. Morgan Stanley analysts reckon an extra 10 basis-point cut to the ECB's deposit rate will shave 5 percent off average earnings per share for euro-area banks in 2017.

There's also the risk that keeping interest rates at artificial lows simply encourages irresponsible lending that will lead to losses when interest rates start to rise.

This creates an additional risk for investors -- and one that CEOs will need to respond to, rather than blame central bankers.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Lionel Laurent in London at

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