Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data

Beyond the Zero Lower Bound: Negative Policy Rates and Bank Lending

“…However the reason is different -they attribute the insensitivity to the relative ease of better capitalised banks to substitute to non-deposit financing. In support of my results, Bottero et al (2019) also find stronger expansionary effects on lending for well-capitalised banks in a sample of Italian banks. Altavilla et al (2019) find that less profitable banks are more likely to pass on negative retail deposit rates to NFCs, which in a similar manner, they motivate as banks with less ability to absorb the monetary policy shock passing the rate cut on to their clients in an attempt to preserve profitability.…”

“…The contrasting results with Heider et al (2019) may be attributable to differences in sample characteristics and the type and measure of lending being analysed. In line with my findings, positive effects on lending have been found by other recent papers (see Demiralp et al, 2019;Basten and Mariathasan, 2018;Bottero et al, 2019;Lopez et al, 2018). Results from the euro area Bank Lending Survey (BLS) also indicate that banks respond to negative rates by increasing their lending volumes and decreasing their lending margins.…”

“…Negative rates also constitute a direct charge on eligible excess reserves held at the central bank. Papers examining negative rates through the lens of banks' relative exposure to charged reserves have generally found expansionary effects in the form of increased lending and risk-taking (Basten and Mariathasan, 2018;Schelling and Towbin, 2018;Bottero et al, 2019). Some studies conclude that the indirect effects of the retail deposits channel are more important for negative rates than the direct effects of the excess reserves channel (Schelling and Towbin, 2018;Jobst and Lin, 2016).…”

Is There a Zero Lower Bound? The Effects of Negative Policy Rates on Banks and Firms

“…However, it may also depend on loan composition, if banks with more non-performing loans have riskier borrowers as Bottero, Minoiu, Peydro, Polo, Presbitero, and Sette (2019) suggest may have occurred in Italy, where banks were unable to offer negative rates on deposits.…”

Is the negative interest rate policy effective?

“…6 In addition, the NIRP can also impact the risk-taking behavior of banks. However, currently the evidence of the NIRP effect on banks' risk-taking provided by the existing literature is mixed (Arce et al, 2018;Neuenkirch and Nöckel, 2018;Demiralp et al, 2019;Heider et al, 2019;Tan, 2019;Bottero et al, 2019).…”