Review the article by Brei, Borio and Gambacorta (2020) and show how you can apply what was covered in BUS307 in a real-world situation. Insightful observations and discussion will attract the superior grade. Conversely inserting paragraphs/sections from your texts, internet and the Brei et al. (2020) article will not be viewed favourably. Also recall that plagiarism can result in a zero grade. Be concise. Bank intermediation when interest rates are very low for long Michael Brei, Claudio Borio, Leonardo Gambacorta 07 February 2020 In the aftermath of the Global Crisis, both short-term and also long-term interest rates have fallen to historically low levels. This column sheds light on how banks adjust their business in a very low interest rate environment. The results are mixed news for financial stability and for banks' capacity to support economic activity through lending. A shift to less risky portfolios, combined with higher capitalisation, strengthens banks' resilience and lending capacity. But lower profitability due to the lower net interest margins may make them more vulnerable and less able to provide loans in the longer term. In the aftermath of the Global Crisis, several central banks in advanced economies have sought to provide a major and prolonged stimulus to economic activity. They have kept policy rates at, or close to, the effective lower bound, engaged in forward guidance, and carried out large-scale asset purchases. As a result, not only short-term but also long-term interest rates have declined to historically low levels, sometimes drifting into negative territory. Such an environment should have an impact on banks' business. How do they adjust? The question matters. It is well known that low interest rates tend to compress net interest margins. There is a limit to how far deposit rates can decline so that, after a point, any further cut in loan rates cannot compensate their reduction (Claessens et al. 2018, Borio et al. 2017). To be sure, a decline in interest rates will boost valuations and hence profits, but the effect dissipates over time while lower margins stay (Bernanke and Kuttner 2005). This is important, since lower profitability saps a bank's first line of defence against losses, making it harder to accumulate capital and hence to lend (Gambacorta and Shin 2018, Borio and Gambacorta 2017).