This means that, faced to negative shocks, the central bank would have a smaller margin to reduce rates, so recessions might last longer and inflation would recover more slowly. Of course, faced with the lower bound, the central bank could use non-standard measures more often.
Persistently low interest rates close to the zero lower bound would also continue to put pressure on the financial system. In this scenario, risk-taking incentives would remain. This means that both risk scenarios – a “snapback” in rates, and persistently low rates – would affect the German banking sector as a whole.