Bank profitability and central bank digital currency

Mario Bellia and Ludovic Calès

Journal of International Financial Markets, Institutions and Money, 2025, vol. 99, issue C

Abstract: This paper analyses the potential effect of a European central bank digital currency (CBDC) on banks’ profitability. We use a large sample of euro area banks that spans the period from 2007 to 2021 to assess the sensitivity of banks’ profits to the deposits. Using quantile regressions, we estimate the conditional profit distribution of a representative bank. We then introduce a shock on the amount of deposits that would be replaced by the CBDC. Our results show that, for a large take-up of CBDC, there might be substantial challenges for the profitability of banks, especially for large banks and for small banks that mostly rely on deposits as a source of funding.

Keywords: Central bank digital currency; CBDC; ECB; Bank deposits (search for similar items in EconPapers)
JEL-codes: G18 G28 G32 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Bank profitability and central bank digital currency (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:99:y:2025:i:c:s1042443124001719

DOI: 10.1016/j.intfin.2024.102105

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