FRANKFURT: The World Economic Forum’s (WEF) bank executives said the European Central Bank’s (ECB) plan to spend at least 1.1 trillion euros ($1.2 trillion) buying assets, including government bonds, may squeeze profitability.
Banks make money on the difference between their funding cost and the interest they charge on loans the wider the gap, the greater the profit. That spread, known as net interest margin that will probably narrow further under ECB President Mario Draghi’s quantitative easing (QE) plan.
Anshu Jain, Deutsche Bank AG Co-Chief Executive Officer said QE means stability for Europe, which is good. Equally it means very low interest rates and a real destruction of net interest margins, which of course is going to be a huge challenge.
