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星期五, 十一月 11, 2022

This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.

Key Points:

This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.
It develops a model closely based on Allen and Gale (1998) and shows the existence of a critical policy rate level, dubbed the tipping point.
Past the tipping point, an interest rate cut has a negative net effect on bank capital and may indeed result in bank insolvency.
From the model, we learn which bank characteristics matter for the tipping point and how they affect it.
Using these theoretical results, we can use data on banks to quantify the tipping point.
To discuss bank solvency, we need to understand what constitutes the assets of a bank from an economic point of view.
A banks deposit franchise, which is generally not capitalised on bank balance sheets, is also a relevant bank asset.
With this concept of solvency in mind, the question becomes: what is the effect of a low policy rate on bank assets?
Past the tipping point, the deposit-franchise effect dominates and a policy rate cut hurts bank solvency.
Our observed value for average bank asset maturity (4.5 years) implies that a 0.55% policy rate is the tipping point.
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More work is required to obtain a sound quantification of the tipping point, also for the euro area.

As interest rates surge: flighty deposits and lending