Low and negative interest rates pose one of the greatest challenges to banking profitability around the world. Net interest margin (NIM), which is the difference between interest earned on assets and the cost of funding, is the first line of defense for banks. Higher NIM means more resources at hand to tackle bad debts, set aside provisions, accumulate capital buffers and make distributions such as dividends. It is therefore not surprising that thinner NIM often corresponds with lower profitability, especially in the negative interest rate policy (NIRP) areas of the world (see Figure 1).There remain parts of the ... (full story)