Central bank digital currency,loan supply,and bank failure risk:a microeconomic approach

Central bank digital currencies(CBDCs),which are legal tenders in digital form,are expected to reduce currency issuance and circulation costs and broaden the scope of monetary policy.In addition,these currencies may also reduce consumers’need for conventional demand deposits,which,in turn,increases banks’loan provision costs because deposits require higher rates of return.We use a microeconomic banking model to investigate the effects of introducing an economy-wide,account-type CBDC on a bank’s loan supply and its failure risk.Given that a CBDC is expected to lower the cost of liquidity circulation and become a strong substitute for demand deposits,both the loan supply and the bank failure risk increase.These increases are countered by subsequent increases in the rates of return on term deposits and loans,which,in turn,reduce the loan supply and thus bank failure risk.These offsetting forces lead to no significant change in banking,as long as the rate of return on loans is below a certain threshold.However,once the rate is above the threshold,bank failure risk increases,thereby undermining banking stability.The problem is more pronounced when the degree of pass-through of funding costs to the loan rate is high and the profitability of a successful project is low.Our results imply that central banks wishing to introduce an economy-wide,account-type CBDC should first monitor yields on bank loans and consider policy measures that induce banks to maintain adequate liquidity reserve levels.

Politics and banking:A survey of the recent literature

This survey aims at briefly summarising key findings of the recent literature dealing with politics and banking.The interplay between banks and politics has received increasing interest in recent years following Dinc(2005)on the influence of elections on bank lending.It focusses on two questions:the influence of elections on bank behaviour,and the interconnections between democracy and banking.Two key findings emerge from the litera-ture.First,elections exert an influence on the banking industry.They affect bank lending and bank failures,with electoral cycles leading to economic costs.Second,democracy has a beneficial impact on the credit conditions of firms.This work provides a roadmap for future research to investigate the political interfer-ence in private banks’behaviour and in developed countries.

COUPLING EFFECT OF SEEPAGE FLOW AND RIVER FLOW ON THE BANK FAILURE

On the basis of the generalized physical model of the riverbank, the experiments were conducted to study the mechanisms of riverbank failure under the coupling effect of seepage flow and river flow. The experimental setup was specially designed, as well as test point location, parameters and procedures, and the main influencing factors were analyzed affecting riverbank failure based on the failure types, the variations of pore water pressure and soil displacement. The results indicated that the coupling effect has different influences on the bank failure in three aspects： the failure type, the process and the extent. In addition, the river flow played a more important role than the seepage flow in the coupling effect on the bank failure.