SI profitability declined in the mid-2000s due to
I. the yield curve becoming more positively sloped.
II. decreases in the NIM ratio.
III. increases in the NIM ratio.
IV. the yield curve becoming flatter and even inverted.

Question

Quizplus · Accepted Answer

II and IV are correct because a decrease in the Net Interest Margin (NIM) ratio and a flatter or inverted yield curve both negatively impact the profitability of financial institutions, such as banks, by reducing the spread between what they earn on loans and pay on deposits.

SI Profitability Declined in the Mid-2000s Due to