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Narrow banking with modern depository institutions: Is there a reason to panic?

AuthorsRodríguez Mendizábal, Hugo CSIC ORCID
Issue DateSep-2020
PublisherEuropean Central Bank
CitationInternational Journal of Central Banking 16(4): 145-197 (2020)
AbstractWhat would be the effect of imposing a 100 percent reserve requirement to depository institutions? This paper contends that reserves do not compete with loans on the asset side of banks’ balance sheets. Thus, they only affect liquidity provision by banks indirectly through their impact on the cost of loan and deposit creation. This cost could be driven to zero if, as the Eurosystem does, central banks remunerated required reserves at the same rate of their refinancing operations. The paper argues that the crucial constraint imposed by a fully backed banking system is collateral availability by depository institutions.
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Identifiersissn: 1815-7556
issn: 1815-4654
Appears in Collections:(IAE) Artículos

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