Monetary Policy and Bank Equity Values in a Time of Low Interest Rates

Ampudia, Miguel; Heuvel, Skander Van den

doi:10.2139/ssrn.2976372

Cited by 27 publications

(21 citation statements)

References 2 publications

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“…Our findings add to the evidence documenting that banks benefit from increasing interest rate levels in a low-interest-rate environment (e.g., Ampudia & van den Heuvel, 2018;Claessens et al, 2018) and suggest a nonlinear policy transmission mechanism (e.g., Brunnermeier & Koby, 2018). However, while Ampudia and van den Heuvel (2018) and Claessens et al (2018) link banking-sector stock market reactions to market-based interest-rate reactions, we establish a direct causal relationship between a communication-based SPR and European banks' net worth.…”

Section: Introductionsupporting

confidence: 78%

“…For the general (reduced) model, the coefficient of 2.1 (1.4) indicates a 50 basis points increase in SPR, resulting in an EURO-STOXX-Banks Future return of +1.1 (+0.7) per cent. Thus, our monetary policy interest-rate-to-performance sensitivity is lower than the market interest-rate-to-performance sensitivity reported byAmpudia and van den Heuvel (2018), assuming a corresponding return of +4.0 per cent.6…”

mentioning

confidence: 53%

“…In a low-interestrate environment, resulting in diminishing net interest rate margins (e.g., Claessens, Coleman, & Donnelly, 2018), banks might have limited ability (and willingness) to pass through interest rates. Thus, when interest rates are low, empirical evidence by Claessens et al (2018) and Ampudia and van den Heuvel (2018) points towards a reversal of the classic Flannery and James (1984) interest-rate-to-performance sensitivity for the banking sector.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Estimating the monetary policy interest-rate-to-performance sensitivity of the European banking sector at the zero lower bound

Hayo

Henseler

Rapp

2019

Finance Research Letters

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Using an event-study design, we investigate monetary policy interest-rate-to-performance sensitivity of the European banking sector over the 07/2012-06/2017 period when interest rates were (close to) zero. We apply the Wordscores approach to introductory statements of ECB's Governing Council press conferences to estimate a 'shadow prime rate'. Based on short-run intraday event windows, we find shadow prime rate changes positively affect changes in the EURO-STOXX-Banks Future. Our findings add to the recent evidence documenting that banks benefit from increasing interest rate levels in a low-interest-rate environment.

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Section: Introductionsupporting

confidence: 78%

mentioning

confidence: 53%

Section: Introductionmentioning

confidence: 99%

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Estimating the monetary policy interest-rate-to-performance sensitivity of the European banking sector at the zero lower bound

Hayo

Henseler

Rapp

2019

Finance Research Letters

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“…Ampudia and Van den Heuvel (2018) look at the effects of ECB monetary policy announcements on bank equity including periods of low and negative interest rates. They find that when interest rates are positive, an unexpected decrease in policy rates raises bank equity—as in English, Van den Heuvel, and Zakrajšek (2018).…”

Section: Contribution and Related Literaturementioning

confidence: 99%

Negative Monetary Policy Rates and Systemic Banks' Risk‐Taking: Evidence from the Euro Area Securities Register

Bubeck¹,

Maddaloni²,

Peydró³

2020

J of Money Credit Banking

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We show that negative monetary policy rates induce systemic banks to reach‐for‐yield. For identification, we exploit the introduction of negative deposit rates by the European Central Bank in June 2014 and a novel securities register for the 26 largest euro area banking groups. Banks with more customer deposits are negatively affected by negative rates, as they do not pass negative rates to retail customers, in turn investing more in securities, especially in those yielding higher returns. Effects are stronger for less capitalized banks, private‐sector (financial and nonfinancial) securities and dollar‐denominated securities. Affected banks also take higher risk in loans.

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“…Ampudia and Van den Heuvel (2017) provide complementary evidence using an event-study methodology. In normal times, a decrease in the policy rate increases banks' stock prices irrespective of their depositsto-assets ratio.…”

mentioning

confidence: 99%

Life below Zero: Bank Lending under Negative Policy Rates

Heider

Saidi

Schepens

2019

The Review of Financial Studies

318

253

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We show that negative policy rates affect the supply of bank credit in a novel way. Banks are reluctant to pass on negative rates to depositors, which increases the funding cost of high-deposit banks, and reduces their net worth, relative to low-deposit banks. As a consequence, the introduction of negative policy rates by the European Central Bank in mid-2014 leads to more risk-taking and less lending by euro-area banks with a greater reliance on deposit funding. Our results suggest that negative rates are less accommodative and could pose a risk to financial stability, if lending is done by high-deposit banks.Received April 17, 2018; editorial decision September 18, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

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Monetary Policy and Bank Equity Values in a Time of Low Interest Rates

Cited by 27 publications

References 2 publications

Estimating the monetary policy interest-rate-to-performance sensitivity of the European banking sector at the zero lower bound

Estimating the monetary policy interest-rate-to-performance sensitivity of the European banking sector at the zero lower bound

Negative Monetary Policy Rates and Systemic Banks' Risk‐Taking: Evidence from the Euro Area Securities Register

Life below Zero: Bank Lending under Negative Policy Rates

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