Published as part of the Financial Stability Review.
Changes in the cost and the composition of bank deposits have important implications for banks’ net interest income. This, in turn, affects their retained earnings, capital position, overall resilience and hence their ability to provide credit to the real economy. The ultimate impact of higher policy rates (Chart A, panel a) on banks’ net interest income depends, in particular, on the structure of their balance sheets and the sensitivity of their deposit and lending rates to policy rates.
Link: Euro area bank deposit costs in a rising interest rate environment