Targeted monetary policy, dual rates, and bank risk-taking

Francesca Barbiero, Lorenzo Burlon, Maria Dimou and Jan Toczynski

European Economic Review, 2024, vol. 170, issue C

Abstract: We assess whether dual interest rates – central bank funding at rates below the interest rates on reserves – influence the size and composition of bank credit. We measure exposure to the policy using daily reactions of bank funding costs to the announcement of the recalibration of the ECB’s TLTROs in April 2020. We then use the Euro area credit register to follow the evolution of bank lending conditions and risk-taking. We find that the measure had a strong positive effect on bank credit and, in contrast to a standard rate cut, was not accompanied by an increase in risk-taking.

Keywords: Unconventional monetary policy; Bank lending; Risk-taking; Dual rates (search for similar items in EconPapers)
JEL-codes: E51 E52 G01 G21 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Targeted monetary policy, dual rates and bank risk taking (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:170:y:2024:i:c:s0014292124002186

DOI: 10.1016/j.euroecorev.2024.104889

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