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Do bank characteristics influence the effect of monetary policy on bank risk?

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  • Altunbas, Yener
  • Gambacorta, Leonardo
  • Marqués-Ibáñez, David

Abstract

We analyze whether the impact of monetary policy on bank risk depends upon bank characteristics. We relate the materialization of bank risk during the financial crisis to differences in the monetary policy stance and bank characteristics in the pre-crisis period for a large sample of listed banks operating in the European Union and the United States. We find that the insulation effect produced by capital and liquidity buffers on bank risk was lower for banks operating in countries that, prior to the crisis, experienced a particularly prolonged period of low interest rates. JEL Classification: E44, E52, G21

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1427.

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Date of creation: Mar 2012
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Handle: RePEc:ecb:ecbwps:20121427

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Keywords: bank characteristics; credit crisis; monetary policy; Risk-taking channel;

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References

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  1. Tobias Adrian & Hyun Song Shin, 2009. "Financial intermediaries and monetary economics," Staff Reports 398, Federal Reserve Bank of New York.
  2. Altunbas, Yener & Gambacorta, Leonardo & Marqués-Ibáñez, David, 2010. "Does monetary policy affect bank risk-taking?," Working Paper Series 1166, European Central Bank.
  3. Raghuram G. Rajan, 2005. "Has Financial Development Made the World Riskier?," Working Papers id:248, eSocialSciences.
  4. Dubecq, S. & Mojon, B. & Ragot, X., 2009. "Fuzzy Capital Requirements, Risk-Shifting and the Risk Taking Channel of Monetary Policy," Working papers 254, Banque de France.
  5. Maddaloni, Angela & Peydró, José-Luis, 2010. "Bank risk-taking, securitization, supervision and low interest rates: Evidence from the euro area and the U.S. lending standards," Working Paper Series 1248, European Central Bank.
  6. Giovanni Dell'Ariccia, 2010. "Monetary Policy and Bank Risk-Taking," IMF Staff Position Notes 2010/09, International Monetary Fund.
  7. Altunbas, Yener & Marqués-Ibáñez, David & Manganelli, Simone, 2011. "Bank risk during the financial crisis: do business models matter?," Working Paper Series 1394, European Central Bank.
  8. Douglas W. Diamond & Raghuram G. Rajan, 2009. "Illiquidity and Interest Rate Policy," NBER Working Papers 15197, National Bureau of Economic Research, Inc.
  9. Giovanni Dell'Ariccia & Robert Marquez & Luc Laeven, 2010. "Monetary Policy, Leverage, and Bank Risk-Taking," IMF Working Papers 10/276, International Monetary Fund.
  10. Hamid Mehran & Anjan Thakor, 2009. "Bank capital and value in the cross section," Staff Reports 390, Federal Reserve Bank of New York.
  11. John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, vol. 60(3), pages 1329-1343, 06.
  12. Berger, Allen N. & Bouwman, Christa H.S., 2013. "How does capital affect bank performance during financial crises?," Journal of Financial Economics, Elsevier, vol. 109(1), pages 146-176.
  13. Matutes, Carmen & Vives, Xavier, 2000. "Imperfect competition, risk taking, and regulation in banking," European Economic Review, Elsevier, vol. 44(1), pages 1-34, January.
  14. Asli Demirguc‐Kunt & Enrica Detragiache & Ouarda Merrouche, 2013. "Bank Capital: Lessons from the Financial Crisis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1147-1164, 09.
  15. Ouarda Merrouche & Enrica Detragiache & Asli Demirgüç-Kunt, 2010. "Bank Capital," IMF Working Papers 10/286, International Monetary Fund.
  16. John B. Taylor, 2009. "The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong," NBER Working Papers 14631, National Bureau of Economic Research, Inc.
  17. González-Aguado, Carlos & Suarez, Javier, 2011. "Interest Rates and Credit Risk," CEPR Discussion Papers 8398, C.E.P.R. Discussion Papers.
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Cited by:
  1. Juan Sebastián Amador Torres & José Eduardo Gómez G. & Andrés Murcia Pabón, 2013. "Loans Growth and Banks´ Risk: New Evidence," BORRADORES DE ECONOMIA 010710, BANCO DE LA REPÚBLICA.

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