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UBS: Negative Rates Encourage Risky Lending


UBS CEO Sergio Ermotti says negative interest rates—put in place by European central banks—are encouraging risky lending practices, spelling trouble for the financial system as a whole.

With negative rates pushing down the rate banks can charge on loans, banks are overextending credit—especially real estate credit—to shore up earnings.

Ermotti’s ominous insight comes just as Central Bank Governor Mario Draghi is weighing a push for even deeper negative rates in his fight against low inflation, Bloomberg reports.

Back in the states, Fed chair Janet Yellen and her merry band of bankers have reportedly been weighing negative rates of their own—while US regulators say lending practices look just like before the 2008 crash. (You know, the one caused by sketchy lending practices?) [Bloomberg]