01959cas a2200265 a 4500 AALejournalIMF006882 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455210831 1018-5941 BD-DhAAL BD-DhAAL Dell'Ariccia, Giovanni. Monetary Policy, Leverage, and Bank Risk Taking / Giovanni Dell'Ariccia, Robert Marquez, Luc Laeven. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (36 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We provide a theoretical foundation for the claim that prolonged periods of easy monetary conditions increase bank risk taking. The net effect of a monetary policy change on bank monitoring (an inverse measure of risk taking) depends on the balance of three forces: interest rate pass-through, risk shifting, and leverage. When banks can adjust their capital structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank's capital structure is fixed, the balance depends on the degree of bank capitalization: when facing a policy rate cut, well capitalized banks decrease monitoring, while highly levered banks increase it. Further, the balance of these effects depends on the structure and contestability of the banking industry, and is therefore likely to vary across countries and over time. Mode of access: Internet Laeven, Luc. Marquez, Robert. IMF Working Papers; Working Paper ; No. 2010/276 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/276/001.2010.issue-276-en.xml IMF e-Library