Les banques américaines et la baisse des taux d'intérêt

Abstract

US banks reactions to the interest rate decline Jacques Le Cacheux Is the decline in interest rates that has been observed in Europe over the last few months likely to be fully reflected in lower cost of borrowing, thus stimulating a credit expansion that would fuel the recovery of business investment spending, as well as households' residential investment and consumption ? In the current business cycle and in the reduction of — mostly short — interest rates, the US economy has been leading the way. Hence studying the US banks behavior over the last three years may yield interesting insights as to what is likely to happen on this side of the Atlantic. True, initial conditions differ, and so does the regulatory and structural environment in which financial institutions operate : financial deregulation and innovation have started earlier and have been more sweeping in the US ; the structure of the banking sector is more fragmented and many firms are probably more vulnerable ; moreover, phenomena of over-indebtedness of certain categories of non-financial agents have tended to reach more disturbing proportions than in Europe, except perhaps in the United Kingdom. At the beginning of the current decade, the financial situation of US commercial banks and Saving & Loans institutions was, on average, much worse than that of French banks today. But they have made a spectacular recovery and their performance, measured by their average asset returns, currently ranks amongst the best in international comparisons. US banks have seized the opportunity offered by the decline in short-run interest rates and the reassessment of a positively-sloped interest rate structure to widen their interest margins and pursue a highly discriminatory credit policy. The total outstanding stock of bank credits has shrunk and the share of Treasury bonds in total assets has been increased. Thus, although the federal budget deficit financing has been eased, the interest rate reduction has had no visible effect on the growth of credit and spending. It would however be wrong to conclude that the easing of monetary policy has not been beneficial : indeed, by offering banks this badly needed opportunity to improve their performance and re-structure their balance sheets, it has avoided a financial crisis that might otherwise have had very detremental effects on real economic activity.