Bankers see QE plan squeezing profitability

Davos

THE European Central Bank's plan to spend at least 1.1 trillion euros (S$1.7 trillion) buying assets, including government bonds, may squeeze profitability, bank executives at the World Economic Forum said.

Banks make money on the difference between their funding cost and the interest they charge on loans - the wider the gap, the greater the profit. That spread, known as net interest margin, will probably narrow further under ECB president Mario Draghi's quantitative easing plan.