Central Bank Digital Currency And Bank Disintermediation In a Portfolio Choice Model

Resumo

Could the introduction of Central Bank Digital Currency (CBDC) lead to
lower deposits (disintermediation) in the banking sector? Could CBDC
reduce banks’ ability to lend? We address these questions in a simple
portfolio choice model with a banking sector. In the model, households
allocate their wealth between an illiquid asset and three liquid assets:
cash, bank deposits and CBDC. An imperfectly competitive banking
sector offers deposits to households and lending to firms. The model
shows that when (i) costs of accessing CBDC are substantially lower than
those of accessing deposits; and (ii) the wealth distribution is relatively
more equal, then CBDC can disintermediate the banking system. The
introduction of CBDC will lead banks to increase remuneration of deposits
to fight the competition. The increase in remuneration will induce higher
deposits by the relatively more well-off, but their aggregate wealth is
not enough to compensate for the relatively less well-off population
who will migrate towards CBDC. This will lead to lower deposits in the
banking system, and lower bank profits. However, if costs of accessing
CBDC are close to that of deposits, or society is relatively more unequal,
than CBDC might not generate disintermediation at all, but banks’ profit
will decrease. Even when CBDC generates disintermediation, the impact
on lending turns out quantitatively small if banks have access to other
forms of funding, such as wholesale or central bank financing.