Preferential treatment distorts banks' demand for government bonds
Transaction-level data used to gauge impact of more beneficial liquidity and capital regulation
Preferential treatment in liquidity and capital regulation increases banks' demand for government bonds "beyond their own risk appetite", according to a Netherlands Bank working paper.
Preferential regulatory treatment and banks' demand for government bonds, by Clemens Bonner, uses transaction-level data to analyse the impact of such preferential treatment by financial regulations on banks' demand for government bonds.
"Liquidity and capital regulation also seem to incentivize banks to
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