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How do interest rates impact bank profitability

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Globally, we have experienced a rapid increase in interest rates, with possibly even higher interest rates in the near future.  What are the effects of higher interest rates on the banking sector?

The following are some examples of an issue that you could address:

  • How do interest rates impact bank profitability?
  • How do interest rates affect bank safety and soundness?
  • Does the effect of higher interest rates on bank depend on whether banks, borrowers, and depositors correctly anticipate the increase in interest rates?
  • How do changes in interest rates affect depositor behavior, and what do those changes mean for banks, borrowers, and regulators?
  • How do changes interest rates change the types of services or loans that borrowers seek from a bank?
  • How do changes in interest rates affect a bank's existing stock of loans and deposits?
  • How do banks change their loan portfolios and lending behavior as interest rates change?
  • What industries are most likely to experience a change in lending behavior from banks in response to a change in interest rates? Why?
  • Why might higher interest rates affect banks today differently than during historical periods with comparable interest rates?

Whether you choose any of these issues or decide to take a different path, a deep dive into a focused question (or a small set of related questions) for your primary post is encouraged.

Reference no: EM133253303

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