Fed paper looks at effects of negative rates on banks
Banks with large holdings of liquid assets could be hurt by negative rates, researcher says
US banks holding large amounts of short-term liquid assets could be hurt by negative policy rates, research published by the Federal Reserve finds.
David Arseneau says high liquidity regulatory requirements, such as the liquidity coverage ratio, could amplify losses in a negative rate environment. Compliance with the LCR in this environment could make it more difficult for these banks to raise capital, he says.
In contrast, banks that rely more heavily on short-term wholesale funding may
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