Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2017-04-25
Number: 17-041/IV
Author-Name: Federico Nucera
Author-Email: fnucera@luiss.it
Author-Workplace-Name: LUISS Guido Carli University, Rome
Author-Name: Andre Lucas
Author-Email: a.lucas@vu.nl
Author-Workplace-Name: Vrije Universiteit Amsterdam and Tinbergen Institute
Author-Name: Julia Schaumburg
Author-Email: j.schaumburg@vu.nl
Author-Workplace-Name: Vrije Universiteit Amsterdam and Tinbergen Institute
Author-Name: Bernd Schwaab
Author-Email: bernd.schwaab@ecb.int
Author-Workplace-Name: European Central Bank, Financial Research
Title: Do Negative Interest Rates Make Banks Less Safe?
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.
Classification-JEL: G20, G21
Keywords: negative interest rates, bank business model, systemic risk, unconventional monetary policy measures
File-Url: https://papers.tinbergen.nl/17041.pdf
File-Format: application/pdf
File-Size: 338709 bytes
Handle: RePEc:tin:wpaper:20170041