Bank profitability rises during recent Fed rate tightening, due in part to US liquidity rules, study says

25 April 2019 9:36pm
Bank profitability has increased during the recent US Federal Reserve belt-tightening, the result in part of post-crisis liquidity rules, Fed researchers said.

The firms’ prosperity during the 2015-18 interval contrasts with mostly declining profitability during three other increases in the target federal funds rate in the last 25 years, said the study posted this week.

“Changes in bank profitability may affect bank risk-taking and stability, which in turn may have spillover effects on the real economy,” said the report by three PhD economists and a senior researcher.