Preferential treatment distorts banks' demand for government bonds

Transaction-level data used to gauge impact of more beneficial liquidity and capital regulation

netherlands-bank
Netherlands Bank

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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