Does monetary policy affect bank risk?

Yener Altunbas, Leonardo Gambacorta and David Marques-Ibanez

No 12002, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: We investigate the effect of relatively loose monetary policy on bank risk through a large panel including quarterly information from listed banks operating in the European Union and the United States. We find evidence that relatively low levels of interest rates over an extended period of time contributed to an increase in bank risk. This result holds for a wide range of measures of risk, as well as macroeconomic and institutional controls including the intensity of supervision, securitization activity and bank competition. The results also hold when changes in realized bank risk due to the crisis are accounted for. The results suggest that monetary policy is not neutral from a financial stability perspective.

Keywords: bank risk; monetary policy; credit crisis. (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac, nep-mon and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Does Monetary Policy Affect Bank Risk? (2014)
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