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ECB Must Weigh Impact of Low Rates on Bank Profits, Knot Says

  • Low interest rates also impact insurers and pension funds
  • ECB has said euro area will have low rates for a long time

The European Central Bank must consider the impact of negative interest rates on the profitability of the region’s banking system, Governing Council member Klaas Knot said.

The ECB’s loose monetary policy is driving European lenders to reduce the rates they charge for new loans. At the same time, their funding costs aren’t falling because they’re hesitant to further reduce deposit rates that are already near zero to prevent customers from withdrawing their cash.