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Maria Dimou

12 May 2022
OCCASIONAL PAPER SERIES - No. 293
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Abstract
In July 2021 the Eurosystem decided to launch the investigation phase of the digital euro project, which aims to provide euro area citizens with access to central bank money in an increasingly digitalised world. While a digital euro could offer a wide range of benefits, it could prompt changes in the demand for bank deposits and services from private financial entities (ECB, 2020a), with knock-on consequences for bank lending and resilience. By inducing bank disintermediation, a central bank digital currency, or CBDC, could in principle alter the transmission of monetary policy and impact financial stability. To prevent this risk, options to moderate CBDC take-up are being discussed widely.In view of the significant degree of uncertainty surrounding the design of a potential digital euro, its demand and the prevailing environment in which it would be introduced, this paper explores a set of analytical exercises that can offer insights into the consequences it could have for bank intermediation in the euro area.Based on assumptions about the degree of substitution between different forms of money in normal times, several take-up scenarios are calculated to illustrate how the potential demand for a digital euro might shape up. The paper then analyses the mechanisms through which commercial banks and the central bank could react to the introduction of a digital euro. Overall, effects on bank intermediation are found to vary across credit institutions in normal times and to be potentially larger in stressed times. Further, a potential digital euro’s capacity to alter system-wide bank run dynamics appears to depend on a few crucial factors, such as CBDC remuneration and usage limits.
JEL Code
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
27 December 2019
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 8, 2019
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Abstract
This article examines bank lending conditions for euro area non-financial corporations (NFCs), making use of the wealth of soft information available in the euro area bank lending survey (BLS) since its inception in 2003. One relevant question in this context is whether the tightening of the bank loan supply during the financial and sovereign debt crises has been offset by the easing of bank lending conditions for NFC loans since 2014. The article illustrates that the easing over this period has come mainly through a substantial loosening of the actual terms and conditions applied by banks to new loans to firms of average credit quality, while the credit standards that banks have established for their loan approval decisions have eased by less. The article also draws on the responses of individual banks to examine the differences in bank lending conditions for NFC loans across bank business models. This analysis reveals that the change in credit conditions of banks with business models more reliant on stable funding sources, such as deposits, is more muted. In short, it looks at additional aspects that enhance the regular assessment of bank lending conditions faced by firms based on the euro area BLS.
JEL Code
E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages