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Negative interest rates are the most honest signal yet of an unspoken market truth: central banks have formally ended the market-based system for credit allocation. Over the last seven years regulators have subsidized lending to targeted sectors – forcing bankers to allocate to favoured markets, clients and business models – and unleashed a flurry of edicts micro-managing banks’ assets and liabilities.
But a negative interest rate policy (Nirp) is a game-changer for the European banking industry.
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