Do negative interest rates make banks less safe?

Federico Nucera, André Lucas, Julia Schaumburg, Bernd Schwaab

Research output: Contribution to JournalArticleAcademicpeer-review

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 languageEnglish
Pages (from-to)112-115
Number of pages4
JournalEconomics Letters
Volume159
Issue numberOctober
DOIs
Publication statusPublished - 2017

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Interest rates
Business model
Financial crisis
Income
Propensity
Central bank policy
Trigger

Bibliographical note

Stored under number ds1120 in Archstore.

Keywords

  • Bank business model
  • Negative interest rates
  • Systemic risk
  • Unconventional monetary policy measures

Cite this

Nucera, Federico ; Lucas, André ; Schaumburg, Julia ; Schwaab, Bernd. / Do negative interest rates make banks less safe?. In: Economics Letters. 2017 ; Vol. 159, No. October. pp. 112-115.
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Do negative interest rates make banks less safe? / Nucera, Federico; Lucas, André; Schaumburg, Julia; Schwaab, Bernd.

In: Economics Letters, Vol. 159, No. October, 2017, p. 112-115.

Research output: Contribution to JournalArticleAcademicpeer-review

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