Dutch banks earned 15.4 billion euro by receiving and putting out money in 2002. That is 1.5 billion euro or 10.8 percent more than in 2001 when they earned 13.9 billion euro through financial mediation.
Revenues from financial mediation by banks
The increase was caused by both the increase in credit loans and the development in interest rates.
Total credit loans
At the end of 2002, banks in the Netherlands had granted a total 938 billion euro in credit, 83 billion euro more than in 2001. More was lent to households in particular (+39 billion euro). Most of this (35 billion euro) was in the form of house mortgages. Loans between banks also increased substantially, by 22 billion euro.
Credit granted by sector
Larger interest margins
The revenues from financial mediation not only increased because the banks lent out more money, however. The development in various interest rates themselves resulted in larger margins.
The money market interest rate fell from an average 4.26 percent in 2001 to 3.32 percent in 2002, while the capital market interest rate fell from an average 5.17 percent in 2001 to 5.00 percent in 2002. The difference between short and long-term interest thus rose from an average 0.91of a percent point in 2001 to 1.68 percent points in 2002.
Banks have benefited from these differences in interest rates. Most of the loans they grant – house mortgages and corporate financing – are lent at high capital market interest rates, while the money used to cover these loans mostly comes from deposits and savings accounts, which have shorter terms and lower interest rates.
Hilbert van Dijk