Negative monetary policy rates and systemic banks' risk-taking: evidence from the Euro area securities register
Author(s)
Bubeck, Johannes
Maddaloni, Angela
Peydro, Jose-luis
Type
Journal Article
Abstract
We show that negative monetary policy rates induce systemic banks to reach-for-yield. For identification, we exploit the introduction of negative deposit rates by the European Central Bank in June 2014 and a novel securities register for the 26 largest euro area banking groups. Banks with more customer deposits are negatively affected by negative rates, as they do not pass negative rates to retail customers, in turn investing more in securities, especially in those yielding higher returns. Effects are stronger for less capitalized banks, private-sector (financial and nonfinancial) securities and dollar-denominated securities. Affected banks also take higher risk in loans.
Date Issued
2020-10-01
Date Acceptance
2020-02-11
Citation
Journal of Money, Credit and Banking, 2020, 52 (S1), pp.197-231
ISSN
0022-2879
Publisher
Wiley
Start Page
197
End Page
231
Journal / Book Title
Journal of Money, Credit and Banking
Volume
52
Issue
S1
Copyright Statement
© 2020 The Authors. Journal of Money, Credit and Banking published by Wiley Periodicals LLC on behalf of Ohio State University
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
License URL
Identifier
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000586140900012&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=1ba7043ffcc86c417c072aa74d649202
Subjects
Social Sciences
Business, Finance
Economics
Business & Economics
negative rates
nonstandard monetary policy
reach‐
for‐
yield
securities
banks
Publication Status
Published
Date Publish Online
2020-11-06