The effect of the Fed zero-lower bound announcement on bank profitability and diversification

In this paper we investigate the impact of the Federal Reserve's decision to maintain the zero-lower bound for at least two years on bank pro tability and strategies. Using a di erence in di erence setting we nd that banks with lower reliance on deposit funding are more sensitive to the policy event. Reduced net worth of low deposit banks, relative to high deposit banks, induces those banks to change their strategies toward an increase in fee income related products to maintain the targeted level of performance. Such an increase is mainly explained by duciary and insurance related revenues that entail a lower risk for nancial stability.