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CBDC and the shadow of bank disintermediation: US stock market insights on threats and remedies

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  • Beckmann, Lars
  • Debener, Jörn
  • Hark, Paul F.
  • Pfingsten, Andreas

Abstract

Deposit-dependent banks might be negatively affected by a central bank digital currency (CBDC) introduction. Particularly, a retail CBDC aimed at consumers may constrain cheap funding, thus eroding bank profits (deposit channel). Our empirical study reveals that stock market reactions of US banks to speeches by US Federal Reserve (FED) executives indicating they intend to introduce a CBDC are indeed more negative the more these banks depend on deposits. However, as soon as the FED promises protection against disintermediation, e.g., via a non-interest bearing CBDC or a CBDC holding limit, we observe that highly deposit-dependent banks experience positive stock market reactions.

Suggested Citation

  • Beckmann, Lars & Debener, Jörn & Hark, Paul F. & Pfingsten, Andreas, 2024. "CBDC and the shadow of bank disintermediation: US stock market insights on threats and remedies," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324008985
    DOI: 10.1016/j.frl.2024.105868
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    Keywords

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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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