Will banks’ falling profits undermine lending?

Commercial bank profits have started to moderate following the launch of negative interest rates as banks have cut lending rates. However, we are not convinced that further cuts in lending rates will inevitably reduce banks’ willingness to provide credit, not least because profit margins remain elevated by past standards. What’s more, banks are the most eager to lend since the early 1990s, so a return to more normal lending behaviour would hardly be a disaster.