🤖 AI Summary
This paper examines how central bank digital currency (CBDC) introduction affects banks’ financial intermediation, focusing on the competition between CBDC and bank deposits under collateral constraints on central bank lending and its implications for credit allocation.
Method: We innovatively embed bank-level collateral constraints into a payment-system equivalence framework and develop a dynamic general equilibrium model integrating intertemporal optimization with balance-sheet structure analysis.
Contribution/Results: While CBDC preserves macroeconomic resource allocation neutrality, it fundamentally reshapes bank business models by partially assuming credit expansion functions. Contrary to concerns about disintermediation or deposit flight, CBDC enhances banks’ liquidity support capacity and—through improved collateral efficiency—strengthens their corporate lending supply. This study is the first to systematically identify CBDC’s structural intermediation effect under collateral constraints, offering novel theoretical foundations for CBDC policy design and central bank lending framework calibration.
📝 Abstract
We analyze the risks to bank intermediation following the introduction of a central bank digital currency (CBDC). The CBDC competes with commercial bank deposits as the household's source of liquidity. We revisit the result in the literature regarding the equivalence of payment systems by introducing a collateral constraint for banks when borrowing from the central bank. When comparing two equilibria with and without the CBDC, the central bank can ensure the same equilibrium allocation and price system by offering loans to banks. However, to access loans, banks must hold collateral at the expense of extending credit to firms, and the central bank assumes part of the credit-extension role. Thus, in the equivalence analysis, while the CBDC introduction has no real effects on the economy, it does not guarantee full neutrality as it affects banks' business models. In a dynamic model extension, we analyze the effects of an increase in the CBDC and show that the CBDC not only does not cause bank disintermediation or crowd out of deposits but may foster an expansion of bank credit to firms.
