López Penabad, CeliaIglesias Casal, AnaSilva Neto, José Fernando2022-03-232022-03-232022Research in International Business and Finance 60 (2022) 101597. https://doi.org/10.1016/j.ribaf.2021.101597http://hdl.handle.net/10347/27702This paper analyses the effect of a negative interest rate policy (NIRP) on profitability and risk taking in the European banking sector and whether this effect is differentiated according to the bank business model. Using a dataset of 2596 banks from 29 European countries over the period 2011–2019 and applying a static modelling approach, we conclude that the implementation of NIRPs lowers the net interest margin and the return on assets of a representative bank by 14.5 basis points and 18.5 basis points, respectively. We also conclude that a decrease in the short-term interest rate lowers the net interest margin when interest rates are already negative. In an environment of negative interest rates, we do not find that European banks take on more risk and conclude that the effects of the implementation of NIRPs influence banks’ profitability and risk taking differently, depending on the business model adoptedeng© 2021 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/)http://creativecommons.org/licenses/by/4.0/Negative interest ratesMonetary policyBank profitabilityBank risk takingEuropean banksjournal article10.1016/j.ribaf.2021.1015970275-5319open access