Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183355
Authors: 
Heider, Florian
Saidi, Farzad
Schepens, Glenn
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2173
Abstract: 
We show that negative policy rates affect the supply of bank credit in a novel way. Banks are reluctant to pass on negative rates to depositors, which increases the funding cost of high-deposit banks, and reduces their net worth, relative to low-deposit banks. As a consequence, the introduction of negative policy rates by the European Central Bank in mid-2014 leads to more risk taking and less lending by euro-area banks with greater reliance on deposit funding. Our results suggest that negative rates are less accommodative, and could pose a risk to financial stability, if lending is done by high-deposit banks.
Subjects: 
negative interest rates
deposits
zero lower bound
bank balance-sheet channel
bank risk-taking channel
JEL: 
E44
E52
E58
G20
G21
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3278-3
Document Type: 
Working Paper
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