Abstract
We study the impact of increasingly negative central bank policy rates on banks’ propensity to become undercapitalized in a financial crisis (‘SRisk’). We find that the risk impact of negative rates depends on banks’ business models: Large banks with diversified income streams are perceived as less risky, while smaller and more traditional banks are perceived as more risky. Policy rate cuts below zero trigger different SRisk responses than an earlier cut to zero.
Original language | English |
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Pages (from-to) | 112-115 |
Number of pages | 4 |
Journal | Economics Letters |
Volume | 159 |
Early online date | 15 Jul 2017 |
DOIs | |
Publication status | Published - Oct 2017 |
Bibliographical note
Stored under number ds1120 in Archstore.Funding
Schaumburg thanks the Dutch National Science Foundation (NWO, grant VENI451-15-022) for financial support. The views expressed in this paper are those of the authors and they do not necessarily reflect the views or policies of the European Central Bank.
Funders | Funder number |
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European Central Bank | |
Nederlandse Organisatie voor Wetenschappelijk Onderzoek | VENI451-15-022 |
Keywords
- Bank business model
- Negative interest rates
- Systemic risk
- Unconventional monetary policy measures