We provide evidence on the effect of the slope of the yield curve on economic activity through bank lending. Using … rates) boosts bank profits and the supply of bank loans. Intuitively, a higher term premium represents greater expected … profits on maturity transformation, which is at the core of banks' business model, and therefore incentivizes bank lending …

We show that the slope of the yield curve affects bank lending and economic activity through an "expected bank …-increases bank profits and loan supply. Intuitively, a higher term premium raises the expected returns from maturity transformation …-a core banking activity- thereby incentivizing bank lending. This effect is more pronounced for banks with higher leverage …

countries. The European Central Bank (ECB), jointly with the Banking Supervision Committee (BSC), has an interest in monitoring …