Joint work with Lars Beckmann, Jörn Debener and Andreas Pfingsten

Abstract: Deposit-dependent banks might be negatively affected by a central bank digital currency (CBDC) introduction. Particularly, a retail CBDC aimed at consumers may constrain cheap funding, thus eroding bank profits (deposit channel). Our empirical study reveals that stock market reactions of US banks to speeches by US Federal Reserve (FED) executives indicating they intend to introduce a CBDC are indeed more negative the more these banks depend on deposits. However, as soon as the FED promises protection against disintermediation, e.g., via a non-interest bearing CBDC or a CBDC holding limit, we observe that highly deposit-dependent banks experience positive stock market reactions.

Available at SSRN