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Do banks invest in riskier securities in response to negative central bank interest rates?

Author

Listed:
  • Bubeck, Johannes
  • Maddaloni, Angela
  • Peydró, José-Luis

Abstract

How do systemic banks in the euro area react to negative central bank interest rates? This article suggests that they do not generally pass negative rates on to their depositors, and that they search for yield by investing in riskier securities. Their investments are directed more towards securities issued by the private sector and denominated in dollars – in addition to euro. JEL Classification: E43, E52, E58, G01, G21

Suggested Citation

  • Bubeck, Johannes & Maddaloni, Angela & Peydró, José-Luis, 2020. "Do banks invest in riskier securities in response to negative central bank interest rates?," Research Bulletin, European Central Bank, vol. 70.
    • Handle: RePEc:ecb:ecbrbu:2020:0070:
    Note: 282957
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    Citations

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    Cited by:

    1. Joscha Beckmann & Klaus-Jürgen Gern & Nils Jannsen, 2022. "Should they stay or should they go? Negative interest rate policies under review," International Economics and Economic Policy, Springer, vol. 19(4), pages 885-912, October.

    More about this item

    Keywords

    Negative rates; Non-standard monetary policy; Reach-for-yield; Securities; Banks;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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