The Effects of Unconventional Monetary Policies on Bank Soundness

Download or read book The Effects of Unconventional Monetary Policies on Bank Soundness written by Frederic Lambert and published by International Monetary Fund. This book was released on 2014-08-13 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unconventional monetary policy is often assumed to benefit banks. However, we find little supporting evidence. Rather, we find some evidence for heightened medium-term risks. First, in an event study using a novel instrument for monetary policy surprises, we do not detect clear effects of monetary easing on bank stock valuation but find a deterioration of medium-term bank credit risk in the United States, the euro area, and the United Kingdom. Second, in panel regressions using U.S. banks’ balance sheet information, we show that bank profitability and risk taking are ambiguously affected, while balance sheet repair is delayed.