Citation

Discussion Paper Details

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

Author(s): Johannes Bubeck, Angela Maddaloni and José Luis Peydró

Publication Date: July 2020

Keyword(s): banks, negative rates, Non-Standard Monetary Policy, reach-for-yield and securities

Programme Area(s): Monetary Economics and Fluctuations

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 non-financial) securities and dollar-denominated securities. Affected banks also take higher risk in loans.

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Bibliographic Reference

Bubeck, J, Maddaloni, A and Peydró, J. 2020. 'Negative Monetary Policy Rates and Systemic Banks' Risk-Taking: Evidence from the Euro Area Securities Register'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14988