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Bank profitability and central bank digital currency

Author

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  • Bellia, Mario
  • Calès, Ludovic

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.

Suggested Citation

  • Bellia, Mario & Calès, Ludovic, 2025. "Bank profitability and central bank digital currency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 99(C).
  • Handle: RePEc:eee:intfin:v:99:y:2025:i:c:s1042443124001719
    DOI: 10.1016/j.intfin.2024.102105
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    More about this item

    Keywords

    Central bank digital currency; CBDC; ECB; Bank deposits;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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