In the published report, the effects of the central bank digital currency on commercial banks, fiscal policy and financial stability are discussed. When looking at the definition in the literature, it is stated that CBDC is a payment instrument with an interest yield and it is not necessarily required to be kept in a bank account or commercial bank.
Experts emphasize that commercial banks will be the first to be affected after CBDCs enter the sector. It is emphasized that commercial banks will have to increase their deposit rates after such a change and this will increase the funding cost of banks. This may pave the way for a significant increase in loan rates. In the FED report, it is stated that, with the domino effect, it may cause banks to change the main funding source first and then to lose the intermediary role of banks. Subsequently, banks’ loan and lending rates may decline sharply.
But St. As long as commercial banks can borrow reserves from the central bank, their intermediation function may not disappear, and banks can still lend even with CBDCs, according to Louis FED executive David Andolfatto.
Read more: https://www.somagnews.com/federal-reserve-publishes-cbdc-assessment/
