CBDC and banks: disintermediating fast and slow

Overview

The paper examines the impact of retail central bank digital currencies (CBDC) on the banking sector, focusing on disintermediation risks. It combines survey data from German households with a macroeconomic model to assess these impacts.

Key Insights

• Slow Disintermediation: CBDC may replace bank deposits in normal times, leading to more expensive funding for banks.
• Fast Disintermediation: During financial stress, CBDC could exacerbate bank runs as it offers a convenient alternative to bank deposits.
• Financial Stability: Introducing a holding limit on CBDC can enhance financial stability by mitigating run risks.

Why It Matters

The findings are crucial for central banks considering CBDC issuance, as it affects financial stability and banking sector dynamics.

Actionable Implications

• Central Banks: Consider implementing holding limits on CBDC to balance benefits and risks.
• Banking Sector: Prepare for potential shifts in deposit bases and funding costs.
• Policy Makers: Use the study's model to inform CBDC policy design.