CBDC and the shadow of bank disintermediation: US stock market insights on threats and remedies

Lars Beckmann, Jörn Debener, Paul F. Hark and Andreas Pfingsten

Finance Research Letters, 2024, vol. 67, issue PB

Abstract: Deposit-dependent banks might be negatively affected by a central bank digital currency (CBDC) introduction. Particularly, a retail CBDC aimed at consumers may constrain cheap funding, thus eroding bank profits (deposit channel). Our empirical study reveals that stock market reactions of US banks to speeches by US Federal Reserve (FED) executives indicating they intend to introduce a CBDC are indeed more negative the more these banks depend on deposits. However, as soon as the FED promises protection against disintermediation, e.g., via a non-interest bearing CBDC or a CBDC holding limit, we observe that highly deposit-dependent banks experience positive stock market reactions.

Keywords: Central bank digital currency; Event study; Financial intermediation; Financial stability (search for similar items in EconPapers)
JEL-codes: E42 E58 G14 G21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324008985

DOI: 10.1016/j.frl.2024.105868

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