Banks from 2008 to 2019: net income affected by a fall in intermediation margins but lower provisions

The onset of persistently low interest rates in the euro area during the decade 2008-2019 impacted the accounts of financial intermediaries, as monetary policy measures supported demand for credit and led to an increase in the size of the balance sheets of both commercial banks and the Banque de France. The increase in the volume of loans did not, however, offset the fall in interest rates; the result of these two opposing developments was to squeeze intermediation margins.

Banking intermediation has therefore become less profitable, and the banking sector now creates less value added. However, the contraction in intermediation margins was not reflected in the banking sector’s net income, which was stable over the period 2015-2019, due in particular to the effects of the fall in provisions and the appreciation of assets – with highly accommodative monetary policy as a contributing factor.