Adam Geršl, Petr Jakubík, Dorota Kowalczyk, Steven Ongena, José-Luis Peydró Alcalde
This paper examines the impact of monetary conditions on the risk-taking behaviour of banks in the Czech Republic by analysing the comprehensive credit register of the Czech National Bank. Our duration analysis indicates that expansionary monetary conditions promote risk-taking among banks. At the same time, a lower interest rate during the life of a loan reduces its riskiness. While seeking to assess the association between banks’ appetite for risk and the short-term interest rate we answer a set of questions related to the difference between higher liquidity versus credit risk and the effect of the policy rate conditioned on bank and borrower characteristics.
JEL codes: E5, E44, G21
Keywords: Business cycle, credit risk, financial stability, lending standards, liquidity risk, monetary policy, policy interest rate, risk-taking
Issued: January 2012
Download: CNB WP No. 2/2012 (pdf, 1.3 MB)