Negative monetary policy rates and systemic banks' risk-taking: Evidence from the euro area securities register

Arbeitspapier

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.

Object Details

• ISBN: 978-3-95729-736-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Deutsche Bundesbank Discussion Paper ; No. 37/2020

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Monetary Policy ; Central Banks and Their Policies ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: Negative Rates ; Non-Standard Monetary Policy ; Reach-for-Yield ; Securities ; Banks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bubeck, Johannes ; Maddaloni, Angela ; Peydró, José-Luis
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/222545
• Last update: 10.03.2025, 11:41 AM CET