Narrowing of euro area banks' margin on loans came to a halt in 2006

Abstract

The narrowing of margins of euro area MFIs new business on loans seems to have come to a halt and they have remained at the level of early 2006. The persistent squeezing of margins ended around the time that Eurosystem key interest rates and market interest rates went on the rise. With the introduction of Basel II, the margins on loans for house purchase narrowed while margins on small loans to non-financial corporations widened.