Demand for excess reserves goes beyond price signals – BIS paper
Study shows drivers for banks include payment flow volatility and cost of borrowing
New research published by the Bank for International Settlements sheds light on what drives lenders’ demand to hold excess reserves at central banks.
In a working paper dated September 2, Per Åsberg-Sommar and Denise Hansson from Sveriges Riksbank and Mathias Drehmann and Vatsala Shreeti from the BIS quantify the factors driving demand using the Swedish banking system as a case study. “We document significant fragmentation in interbank markets with a set of banks that never trade in interbank
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