Life Below Zero:
Bank Lending Under Negative Policy Rates
Florian Heider
European Central Bank & CEPR
Farzad Saidi
Stockholm School of Economics & CEPR
Glenn Schepens
European Central Bank
April 24, 2017
Disclaimer: The views expressed in this presentation represent those of the authors and not necessarily those of the ECB.
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Monetary policy in unchartered territory
To stimulate post-crisis economy, monetary policy has become
non-standard
Some central banks have lowered policy rates to negative
I
Highly controversial
This paper: transmission of negative policy rates to the economy
I
If there is transmission via bank lending, is it different?
I
What are benefits and costs of negative rates?
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Our findings and contribution
1
Transmission of negative rates depends on banks’ funding structure –
different from other “non-standard” measures
I
More deposits → lending ⇓, risk taking ⇑
I
No such effect for lower but non-negative rates
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Our findings and contribution
1
2
Transmission of negative rates depends on banks’ funding structure –
different from other “non-standard” measures
I
More deposits → lending ⇓, risk taking ⇑
I
No such effect for lower but non-negative rates
Characterization of bank risk taking and real effects
I
High-deposit banks lend less, focus on new risky borrowers
I
Safe borrowers switch to low-deposit banks
I
Relaxation of financial constraints for risky borrowers → investment ⇑
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Hypothesis Development
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Negative policy rates in the Eurozone
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Bank lending and bank risk taking
Transmission of monetary policy depends on bank net worth
(Bernanke and Blinder 1988, Bernanke and Gertler 1995)
I
Banks have opaque assets that require costly screening and monitoring
(Holmström and Tirole 1997, Stein 1998)
I
Net worth ⇓ → lending ⇓, risk taking ⇑
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
How does monetary policy affect bank net worth?
Policy rates affect bank assets and liabilities
I
Policy rate ⇓ → loan rates ⇓ → net worth ⇓
I
Policy rate ⇓ → cost of funding ⇓ → net worth ⇑
Expected impact on bank lending and risk taking is ambiguous
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Negative rates allow to separate asset and liability effect
No pass-through of negative policy rate to deposit rates
Liability effect weaker for banks with more deposit funding
→ net worth ⇓
Less lending and more risk taking by high-deposit banks
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
No pass-through of negative policy rate to deposit rates
Pass-through to loan rates
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Differential impact of negative policy rates
Compare lending by banks with different extent of deposit funding
before and after policy rates become negative
⇒ For high-deposit banks:
I
Net worth ⇓ → lending ⇓, risk taking ⇑
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Data description
1
Data
I
I
I
I
2
Baseline measure of bank risk taking
I
3
Syndicated loans: DealScan
Both public and private firms in Europe: Amadeus
Loans granted by any Eurozone lead arranger(s) (at the bank-group
level): SNL
January 2013 (2011) to December 2015
Ex-ante volatility of firms with new loans from Eurozone banks
Exposure to treatment (negative rate in 06/2014)
I
Deposit-to-asset ratios in 2013 (range from 0.5 to 78%)
Summary statistics
Heider, Saidi, and Schepens
Deposit ratios
Equity ratios
Bank Lending Under Negative Policy Rates
Securities ratios
April 24, 2017
Fees
Difference-in-differences specification
yijt
= β 1 Deposit ratioj × After (06/2014)t + β 2 Xit + δt + ηj + eijt ,
where i = firms, j = banks (lead arrangers), and t = transaction date
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Difference-in-differences specification
yijt
= β 1 Deposit ratioj × After (06/2014)t + β 2 Xit + δt + ηj + eijt ,
where i = firms, j = banks (lead arrangers), and t = transaction date
Two identification challenges
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Difference-in-differences specification
yijt
= β 1 Deposit ratioj × After (06/2014)t + β 2 Xit + δt + ηj + eijt ,
where i = firms, j = banks (lead arrangers), and t = transaction date
Two identification challenges
Monetary policy also affects firms’ demand for loans
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Difference-in-differences specification
yijt
= β 1 Deposit ratioj × After (06/2014)t + β 2 Xit + δt + ηj + eijt ,
where i = firms, j = banks (lead arrangers), and t = transaction date
Two identification challenges
Monetary policy also affects firms’ demand for loans
Monetary policy reacts to economic conditions
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Difference-in-differences specification
yijt
= β 1 Deposit ratioj × After (06/2014)t + β 2 Xit + δt + ηj + eijt ,
where i = firms, j = banks (lead arrangers), and t = transaction date
Two identification challenges
Monetary policy also affects firms’ demand for loans
Monetary policy reacts to economic conditions
Control group provides the counterfactual
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Difference-in-differences specification
yijt
= β 1 Deposit ratioj × After (06/2014)t + β 2 Xit + δt + ηj + eijt ,
where i = firms, j = banks (lead arrangers), and t = transaction date
Two identification challenges
Monetary policy also affects firms’ demand for loans
Monetary policy reacts to economic conditions
Control group provides the counterfactual
Placebo around July 2012: lower but still non-negative rate
Within-firm-year estimation
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Baseline Results
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of bank-financed firms
2013 − 2015
Sample
Deposit ratio
× After(06/2014)
Deposit ratio
× After(07/2012)
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
ln(σ(ROAi )5y )
2011 − 2015
0.017***
(0.005)
0.016***
(0.005)
0.018***
(0.005)
0.020***
(0.005)
Y
Y
N
N
N
N
1,576
Y
Y
Y
Y
N
N
1,576
Y
Y
N
Y
Y
N
1,576
Y
Y
N
N
Y
Y
1,576
0.020***
(0.006)
-0.007
(0.004)
Y
Y
N
N
Y
Y
2,490
2011 − 2015
non-Eurozone borrowers
Eurozone
non-Eurozone
lenders
lenders
0.033**
0.009
(0.014)
(0.020)
-0.012
-0.009
(0.010)
(0.012)
Y
Y
Y
Y
N
N
N
N
Y
Y
Y
Y
542
666
Graph
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of bank-financed firms: household vs. NFC
deposits
Sample
Robustness
Household deposit ratio × After(06/2014)
NFC deposit ratio × After(06/2014)
Bank FE
Month-year FE
Country-year FE
Industry-year FE
N
Heider, Saidi, and Schepens
ln(σ (ROAi )5y )
2013 − 2015
Deposit decomposition,
any coverage full coverage
0.027***
0.029***
(0.007)
(0.009)
0.013
0.010
(0.009)
(0.010)
Y
Y
Y
Y
Y
Y
Y
Y
1,500
763
Bank Lending Under Negative Policy Rates
April 24, 2017
Robustness
Adding bank-level controls, alt. definition of exposure
Table
Former loan spreads as alternative risk measure
Table
Public firms’ stock-return volatility
Table
Shorter sample ending before March 2015 (ECB’s PSPP)
Table
Inclusion of non-Eurozone lenders facing negative rates
Table
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Impact of negative policy rates on total bank lending
High-deposit banks should lend less
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Impact of negative policy rates on total bank lending
High-deposit banks should lend less
Sample
Deposit ratio × After(06/2014)
Deposit ratio × After(07/2012)
Deposit ratio
Bank FE
Month-year FE
N
ln(Total loan volume)
2013 − 2015 2013 − 2015 2011 − 2015
-0.010**
-0.009*
-0.009**
(0.004)
(0.005)
(0.004)
0.008
(0.006)
-0.003
(0.009)
N
Y
Y
Y
Y
Y
759
759
1,371
Note: regressions run at the bank-month-year level
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
Graph
April 24, 2017
Within-firm-year estimation
Multiple banks per loan, several new loans to same firm
Examine a bank’s loan share in the syndicate
High-deposit banks should hold smaller shares, confined to safe
borrowers
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Within-firm-year estimation
Multiple banks per loan, several new loans to same firm
Examine a bank’s loan share in the syndicate
High-deposit banks should hold smaller shares, confined to safe
borrowers
2013 − 2015
Sample
Deposit ratio × After(06/2014)
-0.032*
(0.019)
Deposit ratio × After(07/2012)
Firm-year FE
Bank-firm FE
Bank-country-year FE
N
Y
Y
Y
1,712
Loan share ∈ [0, 100]
2011 − 2015
Bottom-half
ROA volatility
-0.037**
-0.150**
(0.016)
(0.071)
0.071
(0.052)
Y
Y
Y
Y
Y
Y
3,045
287
Top-half
ROA volatility
0.031**
(0.011)
Y
Y
Y
282
Note: regressions run at the loan-bank level
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
External Validity
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Bank net worth and risk taking
Deposit ratio × After(06/2014)
Deposit ratio × After(07/2012)
Bank FE
Month-year FE
N
Heider, Saidi, and Schepens
Stock return1m
j
-0.076***
-0.067***
(0.0208)
(0.017)
0.026
(0.041)
Y
Y
Y
Y
775
1,471
ln(σ (returnj )1m )
0.012*
0.013**
(0.0065)
(0.0054)
-0.006
(0.016)
Y
Y
Y
Y
775
1,471
Bank Lending Under Negative Policy Rates
CDS return1m
j
0.141**
0.126**
(0.062)
(0.058)
-0.043
(0.047)
Y
Y
Y
Y
898
1,689
April 24, 2017
Characterization of Bank Risk Taking and Real
Effects
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Nature of risk taking
High-deposit banks add high-risk borrowers: new and switching
Safe borrowers disproportionately switch to low-deposit banks
Table
Figure
No average effect on loan size
I
But larger loans for riskier firms granted by high-deposit banks
Loan terms
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
Table
Interaction with bank capitalization
April 24, 2017
Negative rates overcome rationing
Risk taking concentrated in private firms
New lending is not to “zombie firms”
Table
Riskier borrowers that receive a loan invest more
Sample
Firm risk
Deposit ratio × After(06/2014)
Bank FE
Month-year FE
Country-year FE
Industry-year FE
N
Heider, Saidi, and Schepens
∆t +1,t ln(Investmenti )
2013 − 2014
Bottom tercile Top tercile
-0.057
0.514**
(0.118)
(0.243)
Y
Y
Y
Y
Y
Y
Y
Y
146
149
Bank Lending Under Negative Policy Rates
April 24, 2017
Conclusion
More lending to constrained borrowers that invest
I
Negative rates stimulate post-crisis economy
Below zero, transmission of monetary policy operates differently
I
Brunnermeier and Koby (2016), Rognlie (2016)
Lending is by high-deposit banks to high-risk borrowers
I
Is this matching efficient?
I
What are the implications for financial stability?
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Pass-through of negative (lower) policy rate to loan rates
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Pass-through of negative (lower) policy rate to loan rates
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Summary statistics
Loans sample
σ (ROAi )5y
σ (returni )36m
ROA in %
Leverage in %
No. of employees in thousands
Deposit ratio in %
Equity ratio in %
Eurozone firm ∈ {0, 1}
All-in-drawn spread in bps
Loan size in 2016 ebn
Secured ∈ [0, 1]
Avg. loan share lead arrangers ∈ [0, 100]
Financial covenants ∈ {0, 1}
Maturity of loan in months
No. of lead arrangers
Bank-level sample
Deposit ratio in %
Equity ratio in %
ln(Total assets)
Loans-to-assets ratio in %
Return on assets in %
Net interest margin in %
Mean
0.041
0.085
4.351
35.902
21.687
40.793
5.369
0.781
264.329
0.741
0.690
23.287
0.034
58.782
3.644
Mean
43.053
6.158
11.872
57.207
0.064
1.252
Std. dev.
0.046
0.036
9.144
20.147
56.339
9.452
1.088
0.414
157.035
1.932
0.460
18.602
0.181
27.331
2.862
Std. dev.
18.688
2.878
1.361
17.602
0.834
0.672
Min
0.001
0.030
-98.060
0.000
0.000
0.486
3.398
0
10
0.001
0
0
0
1
1
Min
0.486
1.463
7.064
2.025
-3.288
-0.042
Max
0.488
0.329
80.010
99.985
610.989
64.527
13.608
1
850
68.482
1
100
1
345
20
Max
78.392
22.643
14.409
87.402
4.067
3.423
N
1,576
665
1,576
1,569
1,456
2,450
2,450
2,450
791
2,426
986
591
2,450
2,386
2,450
N
70
70
70
66
70
68
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Further bank-level summary statistics
Deposit ratio in %
Equity ratio in %
ln(Total assets)
Loans-to-assets ratio in %
Return on assets in %
Net interest margin in %
Number of loans (lead arranger)
Average loan size in 2016 ebn
Average loan share ∈ [0, 100]
Proportion of leveraged loans ∈ [0, 1]
Tercile
Bottom
Top
Bottom
Top
Bottom
Top
Bottom
Top
Bottom
Top
Bottom
Top
Bottom
Top
Bottom
Top
Bottom
Top
Bottom
Top
N
24
23
24
23
24
23
22
23
24
23
23
23
23
23
23
23
23
23
23
23
Mean
21.58
61.13
4.98
6.19
12.22
11.46
39.92
68.44
0.04
0.17
0.78
1.53
150.48
71.30
1.19
1.02
17.87
15.01
0.16
0.13
Std. dev
12.60
6.04
2.26
2.04
1.61
0.94
17.97
8.56
0.44
1.05
0.44
0.57
230.75
117.10
0.68
0.53
21.63
17.04
0.21
0.10
t-stat
13.82
1.94
2.00
6.75
0.54
4.98
1.47
0.97
0.48
0.54
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Deposit ratios of high-deposit vs. low-deposit banks
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Equity ratios of high-deposit vs. low-deposit banks
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Securities ratios of high-deposit vs. low-deposit banks
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Fee income of high-deposit vs. low-deposit banks
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Treatment effect on risk taking by high-deposit vs.
low-deposit banks
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of bank-financed firms – robustness
Sample
Robustness
Deposit ratio × After(06/2014)
ln(σ (ROAi )5y )
2013 − 2015
No low
deposits
0.020***
(0.006)
Alt. dep.
ratio
0.019***
(0.005)
0.021***
(0.005)
0.023***
(0.006)
2011 − 2015
0.019***
(0.006)
Deposit ratio × After(07/2012)
ln(Assets)t −1
0.082
(0.059)
Securities ratiot −1
0.009**
(0.004)
Equity ratiot −1
Bank FE
Month-year FE
Country-year FE
Industry-year FE
N
Y
Y
Y
Y
1,571
Y
Y
Y
Y
1,576
Y
Y
Y
Y
1,576
Y
Y
Y
Y
1,576
0.036
(0.054)
Y
Y
Y
Y
1,576
0.020***
(0.006)
-0.008*
(0.005)
0.078
(0.054)
0.000
(0.005)
0.056
(0.039)
Y
Y
Y
Y
2,490
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Former loan spreads of bank-financed firms
ln(All-in-drawn spread before sample period)
2013 − 2015
2011 − 2015
Sample
Deposit ratio × After(06/2014)
0.012**
(0.006)
0.011**
(0.005)
0.012**
(0.006)
0.010*
(0.006)
Y
Y
N
N
N
N
1,218
Y
Y
Y
Y
N
N
1,218
Y
Y
N
Y
Y
N
1,218
Y
Y
N
N
Y
Y
1,218
Deposit ratio × After(07/2012)
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
0.007
(0.008)
-0.003
(0.007)
Y
Y
N
N
Y
Y
1,746
2011 − 2015,
non-Euro
0.041*
(0.023)
-0.020
(0.017)
Y
Y
N
N
Y
Y
445
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Stock-return volatility of bank-financed firms
2013 − 2015
Sample
Deposit ratio × After(06/2014)
ln(σ (returni )36m )
0.005*
(0.003)
0.005*
(0.003)
0.007***
(0.002)
0.007***
(0.003)
Y
Y
N
N
N
N
825
Y
Y
Y
Y
N
N
825
Y
Y
N
Y
Y
N
825
Y
Y
N
N
Y
Y
825
Deposit ratio × After(07/2012)
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
2011 − 2015
0.007*
(0.004)
-0.000
(0.003)
Y
Y
N
N
Y
Y
1,348
2011 − 2015,
non-Euro
0.002
(0.014)
0.006
(0.013)
Y
Y
N
N
Y
Y
363
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of bank-financed firms – sample ends in
February 2015
Deposit ratio × After(06/2014)
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
0.014**
(0.007)
Y
Y
N
N
N
N
864
ln(σ(ROAi )5y )
0.012* 0.013(∗)
(0.007)
(0.008)
Y
Y
Y
Y
Y
N
Y
Y
N
Y
N
N
864
864
0.016*
(0.008)
Y
Y
N
N
Y
Y
864
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Negative rates outside the Eurozone
Extend sample to include non-Eurozone lenders facing negative rates:
1
Denmark (Nationalbanken): -0.20% in July 2012 (raised in late April
2014, negative again starting September 2014)
2
Sweden (Riksbanken): -0.10% in February 2015
3
Switzerland (SNB): -0.25% on sight deposits exceeding exemption
threshold, starting January 2015
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of bank-financed firms – inclusion of
Danish, Swedish, and Swiss banks
Deposit ratio × After
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
0.011***
(0.004)
Y
Y
N
N
N
N
1,342
ln(σ(ROAi )5y )
0.010** 0.011**
(0.004)
(0.005)
Y
Y
Y
Y
Y
N
Y
Y
N
Y
N
N
1,342
1,342
0.012***
(0.005)
Y
Y
N
N
Y
Y
1,342
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Treatment effect on total lending by high-deposit vs.
low-deposit banks
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of bank-financed firms: new borrowers
Deposit ratio × After(06/2014)
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
0.017***
(0.005)
Y
Y
N
N
N
N
1,468
ln(σ(ROAi )5y )
0.016*** 0.017***
(0.005)
(0.006)
Y
Y
Y
Y
Y
N
Y
Y
N
Y
N
N
1,468
1,468
0.018***
(0.006)
Y
Y
N
N
Y
Y
1,468
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of bank-financed firms: potential switchers
Deposit ratio × After(06/2014)
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
0.015**
(0.007)
Y
Y
N
N
N
N
1,061
ln(σ(ROAi )5y )
0.013*
0.012
(0.007) (0.008)
Y
Y
Y
Y
Y
N
Y
Y
N
Y
N
N
1,061
1,061
0.020**
(0.009)
Y
Y
N
N
Y
Y
1,061
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
ROA volatility of firms switching banks
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Impact on loan size: new borrowers
Deposit ratio × After(06/2014)
Deposit ratio × After(06/2014) × σ(ROAi
-0.000
(0.006)
-0.005
(0.006)
Y
Y
N
N
N
N
1,468
Y
Y
Y
Y
N
N
1,468
ln(Loan size)
-0.006
-0.006
(0.005)
(0.006)
)5y
Deposit ratio × σ(ROAi )5y
σ (ROAi )5y × After(06/2014)
σ (ROAi )5y
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
Y
Y
N
Y
Y
N
1,468
Y
Y
N
N
Y
Y
1,468
-0.011
(0.007)
0.284**
(0.126)
-0.252***
(0.091)
-8.584
(5.413)
6.886*
(3.739)
Y
Y
N
N
Y
Y
1,468
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Impact on loan size: potential switchers
Deposit ratio × After(06/2014)
Deposit ratio × After(06/2014) × σ (ROAi
-0.006
(0.008)
-0.002
(0.007)
Y
Y
N
N
N
N
1,061
Y
Y
Y
Y
N
N
1,061
ln(Loan size)
-0.001
-0.000
(0.008)
(0.009)
)5y
Deposit ratio × σ(ROAi )5y
σ (ROAi )5y × After(06/2014)
σ (ROAi )5y
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
Y
Y
N
Y
Y
N
1,061
Y
Y
N
N
Y
Y
1,061
0.004
(0.011)
0.021
(0.177)
-0.207**
(0.083)
1.608
(7.855)
5.214
(3.446)
Y
Y
N
N
Y
Y
1,061
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Impact on loan spreads
Loan terms are not adjusted to reflect higher risk of borrowers
Risk taking rather than search for yield
ln(All-in-drawn spread)
2013 − 2015
2011 − 2015
Sample
Deposit ratio × After(06/2014)
-0.009
(0.006)
-0.006
(0.005)
-0.003
(0.006)
-0.002
(0.007)
Y
Y
N
N
N
N
791
Y
Y
Y
Y
N
N
791
Y
Y
N
Y
Y
N
791
Y
Y
N
N
Y
Y
791
Deposit ratio × After(07/2012)
Bank FE
Month-year FE
Country FE
Industry FE
Country-year FE
Industry-year FE
N
-0.001
(0.006)
-0.002
(0.004)
Y
Y
N
N
Y
Y
1,332
2011 − 2015,
non-Euro
0.015
(0.012)
0.002
(0.015)
Y
Y
N
N
Y
Y
367
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Impact on other loan terms
Deposit ratio × After(06/2014)
Bank FE
Month-year FE
Country-year FE
Industry-year FE
N
Secured ∈ [0, 1]
-0.000
(0.003)
Y
Y
Y
Y
986
Lead share ∈ [0, 1]
0.003
(0.002)
Y
Y
Y
Y
591
Covenants ∈ {0, 1}
0.001
(0.001)
Y
Y
Y
Y
2,450
ln(Maturity)
-0.001
(0.002)
Y
Y
Y
Y
2,386
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Interaction of treatment with bank capitalization
Ambiguous evidence when rates are positive
I
Jiménez et al. (2014) vs. Dell’Ariccia, Laeven, and Suarez (2016)
Sample
Deposit ratio × After(06/2014)
Deposit ratio × After(07/2012)
Bank FE
Month-year FE
Country-year FE
Industry-year FE
N
ln(σ (ROAi )5y )
2013 − 2015
2011 − 2015
Bottom tercile
Top tercile
Bottom tercile
Top tercile
0.033***
-0.010
0.031***
-0.010
(0.010)
(0.014)
(0.010)
(0.015)
-0.007
-0.006
(0.008)
(0.016)
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
527
534
819
832
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017
Negative rates overcome rationing
Sample
Deposit ratio × After(06/2014)
ln(σ(ROAi )5y )
Private firms
0.027***
(0.009)
ln(σ (ROAi )5y )
Public firms
0.011
(0.007)
Y
Y
Y
Y
904
Y
Y
Y
Y
672
Deposit ratio × Exposure
× After(06/2014)
Deposit ratio × Exposure
Exposure × After(06/2014)
Exposure
Bank FE
Month-year FE
Country-year FE
Industry-year FE
N
Leveragei,t −1
ln(σ (ROAi )5y )
ROAi,t −1
Private and public firms
-0.238**
0.012*
-0.036
(0.110)
(0.007)
(0.083)
0.019*
(0.011)
-0.006
(0.006)
-0.923**
(0.451)
0.328
(0.274)
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
1,569
1,576
1,576
Back
Heider, Saidi, and Schepens
Bank Lending Under Negative Policy Rates
April 24, 2017