Do negative interest rates make banks less safe?

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

No 2098, Working Paper Series from European Central Bank

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 is moderate, and depends on banks’ business models: Banks with diversified income streams are perceived by the market as less risky, while banks that rely predominantly on deposit funding are perceived as more risky. Policy rate cuts below zero trigger different SRisk responses than an earlier cut to zero. JEL Classification: G20, G21

Keywords: bank business model; negative interest rates; systemic risk; unconventional monetary policy measures (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-ban and nep-cba
Note: 955417
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2098.en.pdf (application/pdf)

Related works:
Journal Article: Do negative interest rates make banks less safe? (2017)
Working Paper: Do Negative Interest Rates Make Banks Less Safe? (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20172098

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().