Since 2007, many branches of foreign banks have become members of the Norwegian scheme to increase their deposit to loan ratio. This is not purely coincidental. The Norwegian scheme is probably slightly naïve in its design. As mentioned, the amount guaranteed is very high, and there has been a period without fee payments. At the same time, the competition for deposits has intensified at home and abroad. There is an element of moral hazard associated with any insurance scheme. In Norway, even depositors with very large deposits do not have to assess the financial strength of a bank. Our deposit guarantee scheme has a flypaper effect, and under the protection of the scheme the banks have bid up deposit rates to strengthen their liquidity. This will eventually have an effect on lending rates as well.
Benoît Cœuré: Interview with Politico Interview with Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, and Politico, conducted by Mr Pierre Briançon on 23 March 2016, and published on 30 March 2016. *  *  *  The last Governing Council meeting on 10 March seemed to be marked by some ambiguity on negative interest rates. On the one hand, the message was that rates wouldn’t get much lower. On the other, there was the signal that there could be exceptions… The question we are always trying to address is how to design our policy so that it is effective in the situation we face at a given moment. The package announced on 10 March was very potent, both in intensity and in sheer volume. Negative interest rates are not our main instrument, they just support our overall policy. And looking ahead, we’re not short of instruments – our choice is quite large. We will be able to deal with adverse situations if necessary. You indicated that the ECB wasn’t deaf to the banking sector’s concerns about the impact of negative rates on banks’ profitability. Banks’ profitability has improved when you look at the global overall impact of our monetary policy, that is, stronger credit demand and lower risk in the economy. And, as a matter of fact, the interest margin of banks has gone up, not down. Of course, the impact is different depending on banks’ business models and on how negative the rates are.