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Bank lending under negative policy rates

Author

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  • Schepens, Glenn

Abstract

This article shows how the pass-through of negative policy rates via bank lending depends on a bank’s funding structure. When policy rates enter negative territory, high-deposit banks increase risk-taking but reduce lending in the syndicated loan market relative to low-deposit banks. The increase in risk-taking reduces financial constraints for higher risk firms. JEL Classification: E44, E52, E58, G20, G21

Suggested Citation

  • Schepens, Glenn, 2018. "Bank lending under negative policy rates," Research Bulletin, European Central Bank, vol. 43.
    • Handle: RePEc:ecb:ecbrbu:2018:0043:
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    References listed on IDEAS

    as
    1. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    2. S. Demiralp & J. Eisenschmidt & T. Vlassopoulos, 2017. "Negative interest rates, excess liquidity and bank business models: Banks’ reaction to unconventional monetary policy in the euro area," Koç University-TUSIAD Economic Research Forum Working Papers 1708, Koc University-TUSIAD Economic Research Forum.
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    More about this item

    Keywords

    bank lending; bank risk-taking; monetary policy; negative interest rates;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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