Risk-taking channel – does it operate in the Polish banking sector?

Tomasz Chmielewski, Tomasz Łyziak and Ewa Stanisławska

No 305, NBP Working Papers from Narodowy Bank Polski

Abstract: The aim of this paper is to test whether the risk-taking channel of monetary policy transmission mechanism is active in Poland, an emerging market economy. Based on confidential bank-level data we construct novel measures of risk taken by banks. These measures do not require access to loan-level data, nor rely on data from surveys among credit officers. We find some evidence of the risk-taking behaviour of Polish banks, however, only in the segment of large loans to non-financial corporations we are able to conclude that increased risk of new loans represent supply-side phenomenon. We show that the loosening of monetary policy has different effects depending on the initial level of interest rates – the lower the interest rate is, the larger the increase in risk that is generated by the lowering of interest rate. This response is different across banks, with stronger reaction displayed by banks that are large, with low liquidity and with deposits being the most important funding source. Our results contribute to ongoing discussion on consequences of conducting monetary policy in the low interest rate environment as currently observed in many advanced and emerging economies.

Keywords: risk-taking channel; monetary policy; low interest rates (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Pages: 34
Date: 2019
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-tra
Note: We would like to thank Natalia Nehrebecka, Dobromił Serwa and the participants of the CESEE Research Workshop (May 2018, Novy Smokovec, Slovakia), research seminar at Narodowy Bank Polski (May 2018, Warsaw, Poland) and the 7th NBP Summer Workshop (June 2018, Warsaw, Poland) for useful comments.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:305

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