Negative rates and the death of banking

Sid Verma
Published on:

Negative interest rates turn conventional lending dynamics on their head and, bankers say, threaten the liquidity, risk and maturity transformation that lie at the heart of credit intermediation. In other words, they put the entire ethos of traditional banking in peril. Have central bankers misunderstood how the credit transmission channel works in their desperate attempts to stave off deflation?