Negative Monetary Policy Rates and Systemic Banks’ Risk-Taking: Evidence from the Euro Area Securities Register

Bubeck, Johannes; Maddaloni, Ángela; Peydró, José‐Luis

doi:10.2139/ssrn.3582542

Cited by 9 publications

(18 citation statements)

References 19 publications

(23 reference statements)

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“…The authors' explanation is that lower net worth lowers the incentive to screen and monitor risky borrowers. In a related paper, Bubeck et al (2020) find increased relative risk as measured in securities investments, as well as lending. Both can be taken as evidence for the reaching for yield channel, which is driven by a decline in bank profitability.…”

Section: Effects On Bank Lendingmentioning

confidence: 88%

“…exposed banks. Among the papers finding declining bank profitability, the bank exposure measure used is always related to banks' reliance on deposits, such as deposit-to-asset ratios (Heider et al, 2019;Bubeck et al, 2020;Eggertsson et al, 2019;Bittner et al, 2022), or market power in the deposit market as measured by initial deposit spreads (Balloch and Koby, 2019). Heider et al (2019) and Bubeck et al (2020) The one paper among the exposure studies that does not find negative effects on profitability is Bottero et al (2021), which measures banks' exposure using interbank or liquidity positions of Italian banks from 2012 to 2016.…”

Section: Notesmentioning

confidence: 99%

“…Among the papers finding declining bank profitability, the bank exposure measure used is always related to banks' reliance on deposits, such as deposit-to-asset ratios (Heider et al, 2019;Bubeck et al, 2020;Eggertsson et al, 2019;Bittner et al, 2022), or market power in the deposit market as measured by initial deposit spreads (Balloch and Koby, 2019). Heider et al (2019) and Bubeck et al (2020) The one paper among the exposure studies that does not find negative effects on profitability is Bottero et al (2021), which measures banks' exposure using interbank or liquidity positions of Italian banks from 2012 to 2016. The authors show that in the six months following the introduction of negative rates, deposit-dependent banks increased fees for deposits-related banking services, which they claim potentially allowed banks to preserve intermediation margins and profitability after the introduction of negative rates.…”

Section: Notesmentioning

confidence: 99%

“…The results in Grandi and Guille (2020) are similarly mixed. Papers that find no increase in fees include Heider et al (2019), Claessens et al (2018), Bubeck et al (2020), Altavilla et al (2021), Urbschat (2018), andTan (2019). Taken together, these papers indicate that changing business models to increase non-interest income may be feasible in some settings, but not others.…”

Section: Notesmentioning

confidence: 99%

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Making Sense of Negative Nominal Interest Rates

Balloch¹,

Koby²,

Ulate³

2022

ERWP

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Several advanced economies implemented negative nominal interest rates in the middle of the last decade, seeking to provide further monetary accommodation once cuts in positive territory had been exhausted. Negative rates affect banks in novel ways, mostly because during times of negative policy rates the interest rate that banks pay households on their deposits usually remains close to zero. In this review, we analyze the large literature that studies the impact of negative nominal interest rates, proceeding in four steps. First, we explain the theoretical channels through which negative rates affect banks. Second, we discuss the empirical findings about bank outcomes under negative rates. Third, we describe the aggregate transmission channels that influence the macroeconomic implications of a policy rate cut in negative territory. Finally, we compare the general-equilibrium models that have been used to quantify the effectiveness of negative rates and highlight why they have obtained mixed results. We conclude that, if properly implemented, negative rates are a valuable tool that central banks should not discard outright. However, negative rates can have quantifiable costs for the financial sector, and their effectiveness is likely to decline if implemented for long periods.

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Section: Effects On Bank Lendingmentioning

confidence: 88%

Section: Notesmentioning

confidence: 99%

Section: Notesmentioning

confidence: 99%

Section: Notesmentioning

confidence: 99%

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Making Sense of Negative Nominal Interest Rates

Balloch¹,

Koby²,

Ulate³

2022

ERWP

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“…Our augmented bank balance-sheet channel applies both to high-rate environments and to low-rate environments where a rate cut by the central bank sends the policy rate to close to, or below, zero. We therefore contribute to the recent literature on the impact of, specifically, negative policy rates on banks (Heider, Saidi, and Schepens, 2019;Ampudia and Van den Heuvel, 2018;Bubeck, Maddaloni, and Peydró, 2020;Eggertsson et al, 2020;Bottero et al, 2021). 2 In particular, Ulate (2021) shares with us the comparison of a policy-rate cut away from the ZLB and one close to the ZLB.…”

Section: Introductionmentioning

confidence: 99%

The Augmented Bank Balance-Sheet Channel of Monetary Policy

et al. 2022

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Bank lending margins in a negative interest rate environment

Boungou

Mawusi

2021

Int. J Fin Econ

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Following the 2008 Global Financial Crisis, the central banks of many advanced economies resorted to unconventional monetary policies including, the adoption of a negative interest rate policy, aimed at spurring economic recovery and growth. The effectiveness of this policy remains an ongoing debate and largely limited to theoretical assertions. Using a dataset of 9,638 banks from 41 countries over the period 2009-2018, and a Difference-in-Differences estimator, this paper examines whether the adoption of a negative interest rate policy has any effect on bank lending margins. We find that bank margins have contracted in countries where negative rates have been implemented. Our results suggest that, in a negative interest rate environment, the rate on loans declines faster than the rate on retail deposits. Moreover, we show that the effects of negative interest rate policy (NIRP) on bank lending margins were stronger for smaller, less capitalized, deposit-dependent banks. Finally, our findings indicate that banks reliant on retail deposits increased lending in response to NIRP.

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Negative Monetary Policy Rates and Systemic Banks’ Risk-Taking: Evidence from the Euro Area Securities Register

Cited by 9 publications

References 19 publications

Making Sense of Negative Nominal Interest Rates

Making Sense of Negative Nominal Interest Rates

The Augmented Bank Balance-Sheet Channel of Monetary Policy

Bank lending margins in a negative interest rate environment

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