Low rates can encourage risk-taking – BoE paper

shu-175482461-bank-of-england
The Bank of England

Lower interest rates can encourage banks to take riskier investment bets, according to research published by the Bank of England.

The paper, Interest rates, capital and bank risk-taking, by Jonathan Acosta-Smith, divides the effects of policy into a risk-taking channel and a bankruptcy channel. The former describes the incentives banks face in gaining higher returns by taking greater risks, while the latter expresses the disincentive effect posed by the threat of bankruptcy.

At some point,

To continue reading...

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: