Similarly, banks with a lower share of reserves in total assets are more sensitive to interest rate hikes, as they may be forced to liquidate marketable assets at low prices in case of withdrawals (Slide 17, right-hand side). Taken together, the longer-run and heterogeneous impact of rising interest rates needs to be monitored carefully, including banks’ strategies to deal with those challenges.
It appears that the structural characteristics of the best performing industrialised economies, namely a more flexible labour market, a higher degree of competition in product markets and lower barriers to entry for new firms, have been more conducive to exploiting the opportunities provided by new technologies.