For banks, higher interest rates will have diminishing benefits

For banks in the US and Europe, this year’s sharp climb in interest rates has been positive for their performance, helping lift net interest income and net interest margins. But the higher rate environment could become unfavorable for banks as margin improvement begins to taper off and higher credit costs take hold. How are banks preparing? What do prior monetary policy cycles tell us about the correlation between higher interest rates and margin performance? And what happens if borrowers can no longer afford their higher debt-service obligations, especially if the economy weakens further?

Guests: Jorge Rodriguez-Valez, Senior Vice President, Credit Strategy & Risk Group, Moody’s Investors Service; Allen Tischler, Senior Vice President, Financial Institutions Group, Moody’s Investors Service.

Host: Jennifer Wong, Vice President, Sub-Sovereign Group, Moody’s Investors Service.

To read more on this topic, visit The Big Picture page on Moodys.com (some content only available to registered users or subscribers).

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