LOLR creates incentive for banks to over-leverage: Netherlands Bank paper
Central banks' lender-of-last-resort function provides banks with an incentive to engage in activities that lead to a deterioration in lending standards, a Netherlands Bank paper, published on Thursday, says.
Mark Mink, the paper's author, combines models on microeconomic bank risk-taking with the overall stance of the macroeconomy to examine why banks' risk-taking intensifies when macroeconomic conditions seem the most prosperous.
Mink finds that when banks are provided with illiquidity
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe
You are currently unable to print this content. Please contact info@centralbanking.com to find out more.
You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@centralbanking.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@centralbanking.com
More on Financial Stability
Basel Committee to consult on stablecoin capital requirements
Feedback also sought on interest rate risks and G-Sib “window dressing”
BoE and FCA set out plan to oversee ‘critical third parties’
Regulators fear growing reliance on outsourced services could threaten financial stability
UK regulator proposes tougher rules for money market funds
BoE welcomes FCA move and warns of wider risk of “dysfunction” in core markets
Policy-making amid war in Gaza
Bank of Israel has implemented a textbook crisis response, but uncertainty remains
Riksbank governor calls on property companies to reduce debt
Thedéen warns monetary policy “needs to remain contractionary”
Karnit Flug on the Bank of Israel’s emergency responses and challenges ahead
The former Israeli central bank governor and current vice-president of the Israel Democracy Institute speaks with Christopher Jeffery about the BoI’s targeted emergency responses, economic uncertainties and central banking independence
FSB warns of spillovers from ‘multifunction’ crypto firms
High risks and poor governance in crypto sector could impact traditional finance, report says
Heatwave cost Texas 1% of GDP in 2023, says Dallas Fed research
Higher temperatures have significant effects on productivity, but less on jobs, paper finds