Adapting banks to a new normal environment of low interest rates

13 December 2016

The 'new normal' environment of durably low interest rates is challenging the model of banking intermediation. While effects have not yet fully played out, the flattening of the yield curve puts banks' profitability under pressure. To mitigate the impact, banks need to develop a strategic response including measures such as review of their business portfolio, development of asset distribution, cost reduction… In this paper, we focus on two important levers of adaptation: banks need to adapt their pricing schemes, looking at the entire balance-sheet, as well as enhance their ROE forecasting capabilities at product level.