Monetary policy, ownership structure, and risk‐taking at financial intermediaries

Funder: Cranfield University; Id: http://dx.doi.org/10.13039/501100000859
Funder: European Association of Cooperative Banks
Funder: Centre for Social and Sustainable Innovation, University of Victoria
Funder: Santander Universities; Id: http://dx.doi.org/10.13039/501100019904
This paper examines how ownership structure interacts with monetary policy in shaping financial intermediaries' appetite for risk. By constructing a large panel of banks across Western Europe, we provide evidence that differences in bank ownership influence the transmission of monetary policy via the risk-taking channel. While shareholder banks actively adjust the riskiness of their portfolios to changes in interest rates, stakeholder banks appear to be less responsive to such changes. These findings call for greater attention to the nature of bank ownership when setting monetary policy.