Document Type
Conference Paper
Disciplines
5.2 ECONOMICS AND BUSINESS, Economics
Abstract
In the aftermath of the sub-prime mortgage bubble, the Federal Reserve implemented large scale asset purchase (LSAP) programmes that aimed to increase bank liquidity and lending. The excess liquidity created by quantitative easing (QE) in turn may have stimulated bank risktaking in search of higher profits. Using comprehensive data on balance sheets, risk measures, and daily market returns in the U.S., we investigate the link between QE, bank risk-taking, profitability, and systemic risk. We find that, particularly during the third round of QE, banks that were more exposed to the unconventional monetary policy increased their risk-taking behaviour and profitability. However, these banks also reduced their contribution to systemic risk indicating that the implementation of QE had an overall stabilizing effect on the banking sector. These results highlight the different distributional effects of QE.
DOI
https://doi.org/10.21427/1wa7-ex97
Recommended Citation
Kapoor, Supriya and Velic, Adnan, "QE: Implications for Bank Risk-Taking, Profitability, and Systemic Risk" (2023). Conference papers. 22.
https://arrow.tudublin.ie/buschaccon/22
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 4.0 International License.
Publication Details
https://www.ecb.europa.eu/press/conferences/shared/pdf/20231016_ecb_research_ws/Kapoor_Presentation.pdf
https://doi.org/10.21427/1wa7-ex97