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Open AccessArticle

Determinants of Banks’ Net Interest Margin: Evidence from the Euro Area during the Crisis and Post-Crisis Period

Department of Economics and Management, University of Ferrara, Via Voltapaletto, 11, 44121 Ferrara, Italy
Department of Economics, University of Perugia, Via Pascoli, 20, 06123 Perugia, Italy
Author to whom correspondence should be addressed.
Sustainability 2019, 11(14), 3785;
Received: 5 June 2019 / Revised: 2 July 2019 / Accepted: 5 July 2019 / Published: 10 July 2019
(This article belongs to the Special Issue Application of Time Series Analyses in Business)
PDF [424 KB, uploaded 10 July 2019]


This paper analyses the determinants of net interest margin during the period 2008–2014 in the Euro Area. The starting point of the analysis is the premise that this variable is a gauge of financial institutions’ health and stability. In particular, since the outbreak of the global financial crisis, difficulties in achieving sustainable levels of profitability, mainly due to the vulnerable margins from the banks’ traditional activity, have significantly increased the fragility of the European banking system. Besides considering the main bank-level drivers affecting the net interest margin such as market power, capitalization, interest risk and the level of efficiency, we explicitly account for the effects of regulatory and institutional settings. The results show a persistence in the vulnerability of the banks’ sustainable profitability, even though this negative trend has been partly mitigated by the European Central Bank (ECB)’s recent monetary policies. The increase in non-traditional activities as well as the heterogeneous efficiency levels characterizing banking systems across the Euro Area, where operating costs remain generally high, have significantly contributed to the slowdown in bank margins from traditional activity. Finally, the regulatory environment is an important driver of the net interest margin, which remained lower in countries with higher capital requirements and greater supervisory power. View Full-Text
Keywords: net interest margin; Lerner index; financial stability net interest margin; Lerner index; financial stability

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Angori, G.; Aristei, D.; Gallo, M. Determinants of Banks’ Net Interest Margin: Evidence from the Euro Area during the Crisis and Post-Crisis Period. Sustainability 2019, 11, 3785.

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