Does Monetary Policy Affect Bank Risk-Taking?

46 Pages Posted: 8 Apr 2010

See all articles by Yener Altunbas

Yener Altunbas

University of Wales, Bangor

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

David Marques-Ibanez

European Central Bank (ECB)

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Date Written: March 11, 2010

Abstract

This paper investigates the relationship between short-term interest rates and bank risk. Using a unique database that includes quarterly balance sheet information for listed banks operating in the European Union and the United States in the last decade, we find evidence that unusually low interest rates over an extended period of time contributed to an increase in banks' risk. This result holds for a wide range of measures of risk, as well as macroeconomic and institutional controls.

Keywords: bank risk, monetary policy, credit crisis

JEL Classification: E44, E55, G21

Suggested Citation

Altunbas, Yener and Gambacorta, Leonardo and Marques-Ibanez, David, Does Monetary Policy Affect Bank Risk-Taking? (March 11, 2010). ECB Working Paper No. 1166, Available at SSRN: https://ssrn.com/abstract=1574188

Yener Altunbas

University of Wales, Bangor ( email )

Bangor, Wales LL57 2DG
United Kingdom

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Marques-Ibanez (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

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