Digital banks in the euro area have reacted more quickly to policy rate changes than traditional banks. Over 2016‑2025, the ECB studied 170 digital institutions that operate mainly online. During the 2022‑23 tightening, deposit rates rose faster and higher at digital banks, keeping retail deposits flowing in. However, loan rates lagged, rising only about as much as at peers, which squeezed margins and limited lending expansion. In the 2024‑25 easing, digital banks cut new deposit rates more rapidly than their branch‑based counterparts, normalising margins, while loan rates remained sticky. The study finds that monetary policy transmission increasingly works through the funding channel for digital banks, affecting balance‑sheet growth and potentially profitability.
© European Central Bank, 2025.
Summary derived from the ECB website (https://www.ecb.europa.eu ).
Made by AI. If you spot anything of concern write us at contact@cybach.com. We’ll promptly correct irregularities.