Does Monetary Policy Affect Bank Risk-Taking?

By Yener Altunbaş, L. Gambacorta, David Marqués-Ibáñez. Social Science Research Network, 2010

258 citations recorded by the source corpus.

This paper investigates the relationship between short-term interest rates and bank risk. Using a unique database that includes quarterly balance sheet information for listed banks operating in the European Union and the United States in the last decade, we find evidence that unusually low interest rates over an extended period of time contributed to an increase in banks' risk. This result holds for a wide range of measures of risk, as well as macroeconomic and institutional controls.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/1f00536ec565cea015ef149c391f805284f51c50

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Citations in the corpus

Implementing a Macroprudential Framework: Blending Boldness and Realism (2011, unknown): “21 For an explanation of the general concept of the risk-taking channel, see Borio and Zhu (2008); for specific variants and formalisations, see Rajan (2005), Adrian and Shin (2009), Diamond and Rajan (2009) and Fahri and Tirole (2009); for empirical evidence, see Altubas et al (2009), Iannidou et a”
Effects of culture on firm risk-taking: a cross-country and cross-industry analysis (2012, unknown): “Other studies, such as Rajan (2005) and Altunbas et al. (2010), assert that monetary policy easing can induce greater risk-taking through its effects on leverage and asset prices.”
Monetary Policy, Leverage, and Bank Risk-Taking (2010, result): “4This is similar to what happens in models that study the e¤ects of competition for deposits on bank stability (Hellmann, Murdoch, and Stiglitz, 2000, Matutes and Vives, 2000, Cordella and Levy-Yeyati , 2003). assets by lowering the rate it has to pay on deposits.”
The Bank Lending Channel: Lessons from the Crisis (2011, unknown): “This result is consistent with the evidence provided by Altunbas et al. (2010), who analyse in a more systematic way the impact of low interest rates on different measures of bank risk-taking.”
In Search for Yield? Survey-Based Evidence on Bank Risk Taking (2014, methodology): “Alternatively, banks can require borrowers to pledge collateral (Bester and Hellwig 1987).6 In Dell’Ariccia et al. (2010), banks recover nothing from a borrower in case a 4 Altunbas et al. (2010) also look at the impact of house price growth on bank risk taking.”
Bank profitability and risk-taking under low interest rates (2017, background): “Delis & Kouretas (2011) complement the literature by considering the years 2001-2008 and note that low 2 This has also been noted in Altunbas et al. (2010).”
Optimal Monetary and Prudential Policies (2017, background): “11 Households choose (ct, ht, dt, st, kt, it, xt)t≥0 to maximize utility subject to (1) and (2).”