Arbeitspapier
Bank capital regulation in a zero interest environment
How do near-zero interest rates affect optimal bank capital regulation and risk-taking? I study this question in a dynamic model, in which forward-looking banks compete imperfectly for deposit funding, but households do not accept negative deposit rates. When deposit rates are constrained by the zero lower bound (ZLB), tight capital requirements disproportionately hurt franchise values and become less effective in curbing excessive risk-taking. As a result, optimal dynamic capital requirements vary with the level of interest rates if the ZLB binds occasionally. Higher in ation and unconventional monetary policy can alleviate the problem, though their overall welfare effects are ambiguous.
- ISBN
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978-92-899-4065-8
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 2422
- Classification
-
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
Financial Markets and the Macroeconomy
Central Banks and Their Policies
- Subject
-
Zero lower bound
search for yield
capital regulation
franchise value
unconventional monetary policy
- Event
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Geistige Schöpfung
- (who)
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Döttling, Robin
- Event
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Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
-
2020
- DOI
-
doi:10.2866/123040
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Döttling, Robin
- European Central Bank (ECB)
Time of origin
- 2020
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