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

42 Pages Posted: 22 Apr 2020

See all articles by Johannes Bubeck

Johannes Bubeck

Deutsche Bundesbank

Angela Maddaloni

European Central Bank (ECB)

José-Luis Peydró

affiliation not provided to SSRN

Date Written: April, 2020

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.

Keywords: banks, negative rates, non-standard monetary policy, reach-for-yield, securities

JEL Classification: E43, E52, E58, G01, G21

Suggested Citation

Bubeck, Johannes and Maddaloni, Angela and Peydró, José-Luis, Negative Monetary Policy Rates and Systemic Banks’ Risk-Taking: Evidence from the Euro Area Securities Register (April, 2020). ECB Working Paper No. 2398, Available at SSRN: https://ssrn.com/abstract=3582542

Johannes Bubeck (Contact Author)

Deutsche Bundesbank

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

HOME PAGE: http://https://sites.google.com/view/johannesbubeck

Angela Maddaloni

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

José-Luis Peydró

affiliation not provided to SSRN

No Address Available

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