Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/176920
Authors: 
Basten, Christoph
Mariathasan, Mike
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper 6901
Abstract: 
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.
Subjects: 
monetary policy transmission
negative interest rates
bank profitability
risk-taking
bank lending
Basel III
JEL: 
E43
E44
E52
E58
G20
G21
Document Type: 
Working Paper

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