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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title How Banks Respond to Negative Interest Rates: Evidence from the Swiss Exemption Threshold
Organization Unit
Authors
  • Christoph Basten
  • Mike Mariathasan
Language
  • English
Institution University of Zurich
Series Name CESifo Working Papers
Number 6901
Date 2018
Abstract Text We analyze the effect of negative monetary policy rates on banks, using detailed supervisory information from Switzerland. For identification, we compare changes in the behavior of banks that had different fractions of their central bank reserves exempt from negative rates. More affected banks reduce costly reserves and bond financing while maintaining non-negative deposit rates and larger deposit ratios. Higher fee and interest income successfully compensates for squeezed liability margins, but credit and interest rate risk increase. Portfolio rebalancing implies relatively more lending, also compared to an earlier rate cut within positive territory, and risk-taking reduces regulatory capital cushions and liquidity.
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Official URL https://www.cesifo-group.de/de/ifoHome/publications/docbase/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2018/wp-cesifo-2018-02/12012018006901.html
Other Identification Number merlin-id:16151
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