[12] ,[13] In terms of the effectiveness of the monetary stance, a countervailing factor is that the negative policy rate can mechanically weigh on the net interest income of the banking system, since banks typically do not pass on negative rates to most retail depositors.
[14] In principle, the adverse mechanical effect on profitability that is implied by a narrowing of the gap between the lending rate and the deposit rates applied to retail customers could contribute to a re-assessment of lending policies, with banks opting to contract rather than expand lending.