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Long-term deposit funding and demand for central bank funds: Evidence from targeted longer-term refinancing operations
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Long-term deposit funding and demand for central bank funds: Evidence from targeted longer-term refinancing operations

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  • Fudulache, Adina-Elena
  • Goetz, Martin R.

Abstract

We exploit variation in the share of seniors across European banking markets to construct an IV for banks' dependence on long-term deposit funding and find that greater long-term deposit funding reduces demand for long-term central bank funding via targeted longer-term refinancing operations (TLTRO). This effect is stronger when banks face less competition. Long-term central bank funding further motivates banks to reduce their dependence on debt issuance and increase their money markets borrowing. Our findings are consistent with the idea that banks' access to stable funding can crowd out their incentive to apply for (long-term) central bank funding.

Suggested Citation

  • Fudulache, Adina-Elena & Goetz, Martin R., 2023. "Long-term deposit funding and demand for central bank funds: Evidence from targeted longer-term refinancing operations," Discussion Papers 12/2023, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:122023
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    More about this item

    Keywords

    Monetary policy; bank funding; deposit financing;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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