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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Targeted Monetary Policy, Dual Rates and Bank Risk Taking |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | ECB Working Paper |
| Number | 2022/2682 |
| Number of Pages | 50 |
| Date | 2022 |
| Abstract Text | We assess whether central bank credit operations influence the size and composition of bank credit in a negative interest rate environment. We exploit confidential information from the newly established European credit registry to capture bank lending conditions and bank risk taking. For identification, we use high-frequency reactions of bank bonds around the announcement of the April 2020 recalibration of the ECB’s Targeted Longer-Term Refinancing Operations (TLTROs). We find that the credit easing measures had a strong positive effect on bank credit, even when controlling for possible confounding factors. The increase in lending was not accompanied by excessive risk-taking, especially for banks with low intermediation margin, that is, those that were poised to benefit the most from TLTROs’ borrowing rates below the interest rates on central bank reserves. |
| Free access at | DOI |
| Digital Object Identifier | 10.2139/ssrn.4170361 |
| Other Identification Number | merlin-id:23532 |
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