Non-deposit liability and bank risk-taking: International evidence

Yizhong Wang, Shuting Hou, Ting Wang and Mengxuan Li

Pacific-Basin Finance Journal, 2024, vol. 84, issue C

Abstract: We conduct a comprehensive analysis using data from 9,724 commercial banks across 97 countries from 2002 to 2022 to investigate the impact of banks’ non-deposit liabilities on their risk-taking. Our findings reveal that an increase in the proportion of non-deposit liabilities triggers amplified bank risk-taking. Heterogeneity analysis indicates that the positive impact of non-deposit liabilities on bank risk-taking is more pronounced in banks with high reserves and high core tier 1 ratios. During periods of expansionary monetary policy, banks exhibit greater risk-taking in response to increased non-deposit liabilities. Moreover, we ascertain that the expansion in non-deposit liabilities can erode bank profitability by boosting risk-taking.

Keywords: Non-deposit liabilities; Bank risk-taking; Bank profitability (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:84:y:2024:i:c:s0927538x24000635

DOI: 10.1016/j.pacfin.2024.102312

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