Might negative interest rates have a restrictive effect on bank credit supply and economic growth in the euro zone?

While short-term interest rates are negative, the risk is that euro-zone monetary policy may become restrictive due to the situation of European banks. Indeed, banks are faced with very low interest rates on loans, negative interest rates on excess reserves and zero interest rates on deposits, leading to a contraction in their profit margins. But bank credit supply conditions did not deteriorate in the euro zone once interest rates became negative. This may be due to the large size of euro-zone banks’ bond funding, the cost of which has also fallen considerably.