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Determinants of excess reserve holdings

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  • Hoffmann, Peter
  • Sigaux, Jean-David

Abstract

We study the determinants of individual banks’ excess reserve holdings in the context of the ECB’s public sector purchase programme by testing hypotheses concerning the roles of risk-taking, investment opportunities, and market structure. Excess reserves systematically accrue on the balance sheets of banks with a low share of customer deposits, low opportunity costs, and high payments settlement activity.

Suggested Citation

  • Hoffmann, Peter & Sigaux, Jean-David, 2020. "Determinants of excess reserve holdings," Economics Letters, Elsevier, vol. 195(C).
    • Handle: RePEc:eee:ecolet:v:195:y:2020:i:c:s0165176520302731
    DOI: 10.1016/j.econlet.2020.109439
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    References listed on IDEAS

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    1. Florian Heider & Farzad Saidi & Glenn Schepens, 2019. "Life below Zero: Bank Lending under Negative Policy Rates," The Review of Financial Studies, Society for Financial Studies, vol. 32(10), pages 3728-3761.
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    4. Ryan, Ellen & Whelan, Karl, 2021. "Quantitative easing and the hot potato effect: Evidence from euro area banks," Journal of International Money and Finance, Elsevier, vol. 115(C).
    5. Huberto M. Ennis & Alexander L. Wolman, 2015. "Large Excess Reserves in the United States: A View from the Cross-Section of Banks," International Journal of Central Banking, International Journal of Central Banking, vol. 11(1), pages 251-289, January.
    6. Giannetti, Mariassunta & Laeven, Luc, 2012. "The flight home effect: Evidence from the syndicated loan market during financial crises," Journal of Financial Economics, Elsevier, vol. 104(1), pages 23-43.
    7. Chang, Su-Hsin & Contessi, Silvio & Francis, Johanna L., 2014. "Understanding the accumulation of bank and thrift reserves during the U.S. financial crisis," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 78-106.
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    Cited by:

    1. Baldo, Luca & Heider, Florian & Hoffmann, Peter & Sigaux, Jean-David & Vergote, Olivier, 2022. "How do banks manage liquidity? Evidence from the ECB’s tiering experiment," Working Paper Series 2732, European Central Bank.

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    More about this item

    Keywords

    Central bank reserves; Money markets; Asset purchases;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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