The Effects of Unconventional Monetary Policies on Bank Soundness

Frederic Lambert and Kenichi Ueda

No 2014/152, IMF Working Papers from International Monetary Fund

Abstract: Unconventional monetary policy is often assumed to benefit banks. However, we find little supporting evidence. Rather, we find some evidence for heightened medium-term risks. First, in an event study using a novel instrument for monetary policy surprises, we do not detect clear effects of monetary easing on bank stock valuation but find a deterioration of medium-term bank credit risk in the United States, the euro area, and the United Kingdom. Second, in panel regressions using U.S. banks’ balance sheet information, we show that bank profitability and risk taking are ambiguously affected, while balance sheet repair is delayed.

Keywords: WP; return on assets; short-term debt; Monetary Policy; Bank Profitability; Bank Risk; Balance Sheet Repair; fed funds rate; equity ratio; futures contract; Taylor gap; bank CDS spread; bank size; B. bank risk-taking; monetary policy announcement; CDS spread; panel regression; Unconventional monetary policies; Yield curve; Stocks; Bond yields; Central bank policy rate; Global (search for similar items in EconPapers)
Pages: 40
Date: 2014-08-13
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Citations: View citations in EconPapers (48)

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