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Non-deposit liability and bank risk-taking: International evidence

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  • Wang, Yizhong
  • Hou, Shuting
  • Wang, Ting
  • Li, Mengxuan

Abstract

We conduct a comprehensive analysis using data from 9,724 commercial banks across 97 countries from 2002 to 2022 to investigate the impact of banks’ non-deposit liabilities on their risk-taking. Our findings reveal that an increase in the proportion of non-deposit liabilities triggers amplified bank risk-taking. Heterogeneity analysis indicates that the positive impact of non-deposit liabilities on bank risk-taking is more pronounced in banks with high reserves and high core tier 1 ratios. During periods of expansionary monetary policy, banks exhibit greater risk-taking in response to increased non-deposit liabilities. Moreover, we ascertain that the expansion in non-deposit liabilities can erode bank profitability by boosting risk-taking.

Suggested Citation

  • Wang, Yizhong & Hou, Shuting & Wang, Ting & Li, Mengxuan, 2024. "Non-deposit liability and bank risk-taking: International evidence," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:pacfin:v:84:y:2024:i:c:s0927538x24000635
    DOI: 10.1016/j.pacfin.2024.102312
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    More about this item

    Keywords

    Non-deposit liabilities; Bank risk-taking; Bank profitability;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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