Do Negative Interest Rates Make Banks Less Safe?

Federico Calogero Nucera, Andre Lucas, Julia Schaumburg and Bernd Schwaab

No 17-041/IV, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We study the impact of increasingly negative central bank policy rates on banks' propensity to become undercapitalized in a financial crisis (`SRisk'). We find that the risk impact of negative rates depends on banks' business models: Large banks with diversified income streams are perceived as less risky, while smaller and more traditional banks are perceived as more risky. Policy rate cuts below zero trigger different SRisk responses than an equally-sized cut to zero.

Keywords: negative interest rates; bank business model; systemic risk; unconventional monetary policy measures (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Date: 2017-04-25
New Economics Papers: this item is included in nep-ban and nep-cba
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Citations: View citations in EconPapers (45)

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Related works:
Journal Article: Do negative interest rates make banks less safe? (2017)
Working Paper: Do negative interest rates make banks less safe? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20170041

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