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CBDC and Bank Intermediation in the Euro Area

Author(s): Ramón Adalid, Álvaro Álvarez-Blázquez, Katrin Assenmacher, et al

Date published: Jun 2022

SUERF Policy Note, Issue No 281

by Ramón Adalid (ECB), Álvaro Álvarez-Blázquez (Bank of England), Katrin Assenmacher (ECB), Lorenzo Burlon (ECB), Maria Dimou (ECB), Carolina López-Quiles (IMF), Natalia Martín Fuentes (ECB), Barbara Meller (ECB), Manuel A. Muñoz (ECB), Petya Radulova (ECB), Costanza Rodriguez d’Acri (ECB), Tamarah Shakir (ECB), Gabriela Šílová (Morgan Stanley), Oscar Soons (ECB) and Alexia Ventula Veghazy (ECB)1

JEL codes: E42, E51, G21.
Keywords: CBDC, digital euro, bank intermediation, bank runs.

Download: SUERF Policy Note, Issue No 281SUERF Policy Note, Issue No 281 (0.6 MB)

In 2021 the Eurosystem launched the investigation phase of the digital euro project, which aims to provide euro area citizens with access to central bank money in an increasingly digitalised world. While a digital euro could offer a wide range of benefits, it could also alter the transmission of monetary policy and impact financial stability through changes in the demand for bank deposits and services from private financial entities. Acknowledging the significant uncertainty surrounding the design of a potential digital euro, potential demand for it and the prevailing environment in which it would be introduced, this SUERF policy note presents a set of analytical exercises that offer insights into the consequences a digital euro could have for bank intermediation in the euro area. Based on assumptions about the degree of substitution between different forms of money in normal times, several take-up scenarios are used to explore the mechanisms through which commercial banks and the central bank could react to the introduction of a digital euro. Overall, effects on bank intermediation are found to vary across credit institutions in normal times and to be potentially larger in stressed times. Further, the analysis finds that in principle factors such as CBDC remuneration and usage limits could be deployed to manage the impacts on bank disintermediation.

Illustrative digital euro demand scenarios

The implications of introducing a digital euro for bank intermediation will depend heavily on the size of the take-up. However, estimating the future demand for a digital euro is particularly challenging at this stage given (i) the lack of experience with CBDC, particularly in advanced economies, (ii) that many important design features of a potential digital euro have not been decided yet and (iii) the uncertainty surrounding the prevailing financial and monetary environment at the time of introduction.

Therefore, we focus on two hypothetical scenarios that illustrate markedly different take-up levels, complemented by one in which the supply of digital euro is restricted. The choice of these scenarios is not based on their likelihood and, thus, should not be seen as an attempt to forecast future demand for a digital euro. They merely aim to numerically illustrate three different cases: a “moderate demand for retail payments only” (Take-up A), a “large demand” both for retail payments and storage of value (Take-up B) and a “capped” take-up (Take up C, see Chart 1.a).2 These static take-up estimates would represent between 0.5% and 18% of euro area bank liabilities (Chart 1.b). However, they do not take into account potential reactions of banks (e.g. banks could change the conditions and functionalities of the services they offer to defend their market share) or general equilibrium effects, including any potential reaction by the central bank aiming to offset unwanted effects.

Chart 1
Hypothetical digital euro demand scenarios

a) Digital euro take-ups by sector
(EUR trillions)
b) Digital euro take-ups as a share of bank liabilities
 width=  width=

Source: ECB calculations.
Note: The chart on the right shows what proportion of the total take-up in the chart on the left substitutes banknotes or overnight deposits. Total customer deposits includes all deposit liabilities except those between euro area banks.

A stylised balance sheet approach

Balance sheet relations provide a consistent framework to analyse how the introduction of a digital euro would alter banks’ balance sheet positions and affect banks’ intermediation capacity.

To meet their clients’ demand for CBDC, banks must obtain the necessary reserves and can undergo five possible adjustment channels. In resemblance to banknotes, it is assumed that banks would be the distributing agents of a digital euro. When their clients want to replace deposits with CBDC, banks must first obtain the digital euro from the Eurosystem (in exchange for reserves or banknotes) and then “resell” it to the final holders. To this end, banks can (I) intermediate the substitution of banknotes for CBDC on behalf of their clients, with no impact on their balance sheets; (II) draw down existing reserves with the Eurosystem, potentially leading to a reallocation of reserves through inter-bank borrowing; (III) increase their borrowing from the Eurosystem; (IV.a) sell assets to the Eurosystem from their own portfolios; (IV.b) sell assets to the Eurosystem on behalf of their clients. In this case, the volume of deposits in the economy would remain unchanged, as banks would credit the accounts of the sellers, thus offsetting the deposit substitution into CBDC. Which of these adjustment channel/s will be used depends on the preferences and constraints of banks, customers and – importantly – on the decisions of the Eurosystem to accommodate the adjustments on its own balance sheet resulting from CBDC issuance.

When evaluating the impact on bank intermediation capacity, the interplay between a digital euro and the frictions and constraints present in the financial system needs to be assessed. The stylised balance sheet analysis corroborates results in the literature that in a completely frictionless economy, the introduction of a digital euro would be neutral for banks’ intermediation capacity.3 However, frictions and regulatory constraints are pervasive in the current financial system and are likely to change this outcome. For instance, with an imperfect money market, a significant reduction in banks’ reserves with the central bank may result in money market tensions. Similarly, an imperfect substitutability between deposits and central bank funding (e.g. because of collateral requirements, or stigma associated with excessive reliance on central bank funding) might affect bank credit provision.

Simulated bank responses to CBDC demand under liquidity risk preferences and regulation

To meet customer demand for CBDC, individual banks face a trade-off between balancing their profitability and liquidity risks. To exchange retail deposits with CBDC, a bank can either use its own reserves or acquire new reserves via central bank funding, or market funding. When choosing between different funding options, a bank faces a trade-off: Secured funding is generally cheaper than unsecured funding and short-term funding is cheaper than long-term funding. However, using its own reserves or obtaining funding secured by high quality liquid assets (HQLA) negatively impacts banks’ liquidity positions. Drawing down or encumbering its stock of HQLA depletes the pool of assets that can be liquidated in times of need. Furthermore, using short- rather than long-term funding increases roll-over risk in times of stress.4

If a digital euro was introduced in the presence of such high reserves, most banks could accommodate CBDC demand as anticipated in scenarios A and C using their excess reserves, under assumed liquidity preferences.5 A bank balance sheet simulation model suggests that most banks could accommodate CBDC demand using their excess reserves with low CBDC demand (see Chart 2). However, bank-level heterogeneity with respect to liquidity preferences and reserve and collateral availability could result in diverging bank responses to the introduction of CBDC. Furthermore, liquidity regulation or voluntary liquidity buffers could reduce the total amount of reserves that banks are willing to use or sell to facilitate CBDC conversion. Thus, the central bank might want to provide non-HQLA long-term lending (>1 year) or non-HQLA purchases to accommodate CBDC demand, especially for the high-demand scenario B.

Chart 2
Bank balance sheet re-optimisation

(x-axis: share of deposit outflow covered by funding sources; y-axis: EUR billions)

Source: Own calculations from simulation using regulatory data.
Notes: The simulation uses data from Q3 2021 for a selection of SIs and LSIs.

Potential impact of a digital euro on bank intermediation capacity and lending conditions: insights from bank valuations

Bank stock market valuations provide some insight about current investor perceptions regarding the potential implications of a digital euro for banks’ business models. This information can be extracted around events that define agents’ expectations about the digital euro, to the extent that banks’ stock prices reflect also future profitability prospects. In fact, stock market developments might be one of the few, however partial, sources of evidence available given that the digital euro project is currently still under development.

News about the digital euro have had a stronger, albeit temporary, impact on valuations for banks relying more on deposit funding (Chart 3).6 Following the publication of the ECB report on the digital euro in early October 2020, stock prices of banks more reliant on deposit funding declined but fully recovered as more details about the actual design and timing of the project were made public (dashed dark-yellow line in Chart 3).7 This reaction is consistent with market participants either discounting a potentially large disintermediation effect or needing several months to absorb the information flow on this subject. At the same time, stock prices of banks with low reliance on deposits increased in response to digital euro events ever since the publication of the ECB report in October 2020 (solid light-yellow line in Chart 3). This seems to be in line with the business models of these banks being perceived by markets as being less affected by the introduction of a digital euro, while still having the potential to benefit from the possible new business opportunities created.

The evolution of valuations seems to point to investors anticipating diverging, but transitory, implications for lending conditions across bank business models. The reallocation in market shares that the differentiated impact across more and less deposit-reliant banks might entail (difference between the solid light yellow and dashed dark yellow lines of Chart 3) can be quantified by studying the reaction of banks themselves in the months spanning the events referred to above. Looking at developments in loan markets8, the cross-sectional difference in the reaction of stock prices to digital euro news (amounting to roughly 4 percentage points) has been associated with a reallocation of market shares of around 1.5% of ex ante volumes at the peak. This reallocation was, in fact, temporary and limited to the period leading up to the communication of further details about the project.

Chart 3
Stock market reactions to CBDC news by euro area banks

(percentage points)
Source: Burlon, Montes-Galdón, Muñoz and Smets (2022). Notes: A 3-factor Fama-French model is fitted to daily two-day stock market returns of 134 euro area banks, isolating the abnormal returns occurred at key events for each bank. Each horizontal segment reports the cumulated abnormal returns across key events. The solid dark yellow line focuses on the IBSI sample, with dashed dark-yellow and solid light-yellow lines reporting the detail by level of deposit ratio, above and below median respectively. The three vertical lines indicate three key noteworthy events: the publication of the ECB report on the digital euro on 2 October 2020, the speech by Mr Panetta on 10 February 2021 (Panetta, 2021b) and the launch of the digital euro project on 14 July 2021. Latest observation: 10 September 2021.

Considerations on the severity of potential economy-wide bank runs

Besides any implications for bank intermediation in normal times, a digital euro could affect the severity of bank runs as it would provide citizens with a super-safe asset at comparatively low storage costs. During times of stress and depending on its design, the role a digital euro could potentially play as a store of value could become particularly relevant as it is a more easily accessible super-safe asset with lower storage costs, when compared to cash.9

Using a model for simulated bank runs that approximates the speed and scale of past economy-wide bank runs we assess potential effects of the presence of a CBDC. The model assumes that individual decisions on the conversion of bank deposits into cash or CBDC are based on an expected return maximisation behaviour. Cash and CBDC are the only assets that can be used as a safe store of value with the latter being preferred due to a technological superiority.10 The dynamics of monthly deposit withdrawals are simulated, and the parameters of the model are calibrated such that simulated withdrawals match the deposit outflows registered during the recent economy-wide bank runs in Greece (2015) and Cyprus (2013).

Counterfactual simulations that vary the limits on CBDC usage and remuneration are used to describe the potential impact of a digital euro on the severity of bank runs. The presence of a digital euro may affect the scale and speed of bank runs along three dimensions. First, depending on its remuneration and usage costs, a digital euro may allow for a lower- cost alternative to cash holdings. Second, depending on the selection and calibration of usage limits it may also allow for instant and “unlimited” withdrawals (whereas the conversion of deposits into cash is subject to limits). Third, the scale of a bank run decreases with the amount of deposits that has been converted into a digital euro in normal times (i.e., prior to the bank run). This is the case because the scale of a bank run is increasing in the amount of deposits in the system that can be withdrawn.

If adequately calibrated, CBDC usage limits and remuneration can neutralize any effect the presence of a digital euro could possibly have on the scale and speed of bank runs. If demand were unconstrained, a digital euro would lead to an increase in the scale and speed of a (simulated) system-wide bank run. However, and depending on their calibration, there are different types of usage limits that could permit a digital euro not to amplify the scale and speed of simulated economy-wide bank runs (Chart 4). When compared to a scenario without a digital euro, the increased scale of bank runs is reflected by a larger share of deposit withdrawals, while the increased speed of bank runs is reflected by the shorter time it takes to reach a certain amount of deposit withdrawals. The potential costs to society of this increased scale and speed of simulated bank runs would need to be weighted with potential benefits that are not considered in the analysis but some of which the paper cites.

Chart 4
Simulated cumulative deposit withdrawals in Greece under illustrative digital euro take-up scenario C: Hard vs soft limits on individual digital euro holdings

a) Hard limit on individual CBDC holdings  b) Soft limit on individual CBDC holdings (I)
(Aug 2014 – Dec 2015, percentages of deposits in Aug 2014) (Aug 2014 – Dec 2015, percentages of deposits in Aug 2014)
 width=  width=

c) A soft limit on individual CBDC holdings (II)

d) A soft limit on individual CBDC holdings (III)
(Aug 2014 – Dec 2015, percentages of deposits in Aug 2014) (Aug 2014 – Dec 2015, percentages of deposits in Aug 2014)
 width=  width=

Source: Own calculations from simulation using BSI data


The study is complemented with a theoretical model for bank run analysis which concludes that introducing a CBDC induces efficiency gains but may also increase the probability of cyclical deposit withdrawals.11 Due to the superiority of CBDC as a storage technology – which in the model is captured by the empirically-relevant assumption that cash holdings are subject to storage costs - any replacement of cash with CBDC implies that individuals need less resources to satisfy their demand for central bank money as a safe store of value. Consequently, such substitution allows for an increase in deposit holdings (i.e., structural bank intermediation). According to this model, the scale of a bank run only depends on depositors’ beliefs of what other depositors will do and is independent from the introduction and availability of a CBDC. Nonetheless, it shows that under certain conditions the introduction of a CBDC increases the probability of state-dependent conversions of deposits into central bank money.


A digital euro would offer several economic benefits but, depending on its design, it could also affect financial stability and monetary policy transmission through changes in the demand for bank deposits. Due to the presence of certain imperfections, constraints and bank-level specificities, a digital euro could possibly alter bank intermediation capacity and such impact could vary across credit institutions. Such impact is found to be potentially larger in stressed times. However, by adequately calibrating CBDC usage limits and remuneration any effects induced by a digital euro on bank intermediation can be managed, even in the event of an economy-wide bank run.



Adalid, R., Assenmacher, K., Álvarez-Blazquez, A., Burlon, L., Dimou, M., López-Quiles, C., Martín, N., Meller, B., Muñoz, M. A., Radulova, P., Rodriguez d’Acri, C., Shakir, T., Silova, G., Soons, O., and A. Ventula, (2022). "Central Bank Digital Currency and Bank Intermediation: Exploring Different Approaches for Assessing the Effects of a Digital Euro on Euro Area Banks," ECB Occasional Paper Series 293.

Brunnermeier, M. K. and D. Niepelt, (2019). “On the equivalence of private and public money”, Journal of Monetary Economics, 106, pp.27-41.

Burlon, L., Montes-Galdón, C., Muñoz, M. A. and F. Smets, (2022). “The optimal quantity of CBDC in a bank-based economy”, ECB Working Paper Series, forthcoming.

Diamond, D. W., and P. H. Dybvig, (1983). "Bank Runs, Deposit Insurance, and Liquidity", Journal of Political Economy, 91(3), 401-419.

European Central Bank (2020), Report on a digital euro, Frankfurt am Main.

Muñoz, M. A. and Soons, O. (2022), “In search of safety: cash, insured deposits, or central bank digital currency?”, ECB Working Paper Series, forthcoming.

Panetta, F. (2021c). “The present and future of money in the digital age”, lecture given at Federcasse, 10 December.


About the authors

Ramón Adalid is a Lead Economist in the Monetary Analysis Division in the Directorate General (DG) Monetary Policy of the European Central Bank (ECB). He joined the ECB in 2003, where he has worked in DG Research, DG Statistics, DG Market Operations, DG Market Infrastructure and Payments, before joining his current business area in 2008. In his current role, Ramón contributes to the analysis and assessment of monetary developments in the euro area and the monetary policy implications of digital currencies. He holds a Master’s degree in Economics and Finance from CEMFI.

Álvaro Álvarez-Blázquez is a Senior Financial Analyst at the Financial Stability Banking Operations Unit of Bank of England. Prior to that he was a Trainee in the General Directorate of Macroprudential Policy and Financial Stability of the European Central Bank and a Senior Consultant in the Financial Risk Management Department of KPMG in Madrid. Álvaro holds a Master in Economics, Data Analytics and Corporate Finance from École Polytechnique (France) and a Bachelor in Economics from Universidad Carlos III (Spain). His main expertise is in financial risk management, with a particular focus on financial stability matters.

Katrin Assenmacher is Head of the Monetary Policy Strategy Division at the European Central Bank (ECB) since November 2016. From 2010 to 2016 she led the Monetary Policy Analysis unit at the Swiss National Bank (SNB). Her professional interests lie in the areas of monetary policy and time-series econometrics. She published several articles in international academic journals on modelling the role of money in the inflation process, analysing business cycle indices and estimating central bank reaction functions. Katrin was a visiting scholar at the Federal Reserve Banks of St. Louis and Atlanta, the Oesterreichische Nationalbank and the Universities of Copenhagen and Southern California. She holds a Doctorate and a Diploma in economics from the University of Bonn, where she also received her Habilitation. During her tenure at the SNB she lectured courses on monetary policy and macroeconomics at the universities of Zurich and Bern and served as a member of the Czech National Bank´s Research Advisory Committee.

Lorenzo Burlon is a Lead Economist in the Directorate General Monetary Policy of the European Central Bank (ECB). Prior to joining the ECB, he worked at the Directorate General for Economics, Statistics and Research of the Banca d’Italia and at the University of Barcelona. He holds a Ph.D. from Universitat Autònoma de Barcelona. His research interests cover monetary policy and its transmission mechanism, empirical banking and structural modelling.

Maria Dimou is an Economist in the Monetary Analysis Division in the Directorate General (DG) Monetary Policy of the European Central Bank (ECB). Before joining her current department in 2017, she worked in the Monetary Policy Research Division in DG Research of the ECB and in the Research Centre of the Deutsche Bundesbank. In her current role, Maria contributes to the assessment of monetary policy transmission via banks, with a particular focus on the analysis of bank heterogeneity using firm/bank-level information and granular data from credit and security registers. She holds a M.Sc. in Economics from Stockholm School of Economics.

Carolina López-Quiles is an Economist at the International Monetary Fund, Monetary and Capital Markets department. She contributed to this paper during her previous position as Research Analyst at the European Central Bank. Carolina holds a PhD in Economics from the European University Institute, and an MSc in Monetary Policy and Banking from the University of Amsterdam. Her research interests are in the fields of banking, finance, and monetary economics. The views expressed in this paper do not necessarily reflect those or her current or past employers.

Natalia Martín Fuentes is a Supervision Analyst in the Directorate Supervisory Strategy and Risk of the European Central Bank, where she previously worked both in the Directorate General (DG) Macroprudential Policy and in the Financial Stability and the DG International & European Relations. Throughout her career, she has pursued research on monetary policy, international trade and finance, central bank digital currencies (CBDC), and empirical banking. Natalia holds a M.Sc. in Economic and Business Analysis and is currently a PhD Candidate in Economics at the University of Málaga. She has been a Visiting Research PhD Fellow at the University of Cambridge. Before joining the European Central Bank, she worked as a Substitute Professor at the University of Málaga and in financial consulting.

Barbara Meller is Senior Economist in the Market Operations Analysis Division at the ECB since May 2022. Prior to that, she held different positions at the ECB’s Macroprudential Policy and Financial Stability DG as well as at the ECB Banking Supervision and Bundesbank. Her policy and research interests cover financial stability, in particular banks’ systemic importance and interconnectedness, CBDC and monetary policy transmission. Barbara holds a Master in Econometrics and Operation Research from Maastricht University and a PhD from Goethe University Frankfurt.

Manuel A. Muñoz is a Senior Lead Expert at the European Central Bank. Prior to that he held the position of Senior Adviser for Financial Affairs at the Minister’s Office of the Spanish Ministry for Economy and Business. He has served as Head of Service at the Spanish Treasury, first at the Financial Policy and Regulation Department and, then, at the Strategic Analysis and International Financial System Department. Manuel holds a PhD in Economics (UCM, UV, UPV and UCLM) and a MSc in Specialized Economic Analysis (Barcelona School of Economics). He is a member of the Senior Corps of Spanish State Economists and Trade Experts and a “la Caixa” Fellow since 2012. His research interests are mainly in the fields of macroeconomics, monetary economics and banking.

Petya Radulova is a Financial Stability Expert in the Systemic Risk and Financial Institutions Division in the Directorate General (DG) Macroprudential Policy and Financial Stability of the European Central Bank (ECB). She joined the ECB in 2018 working in DG Market Operations before joining her current business area in 2019. In her current role, Petya contributes to the analysis of funding and liquidity conditions of euro area banks and assesses financial stability implications from the introduction of the digital euro. She holds a Master’s degree in Economics from University of Freiburg.

Costanza Rodriguez d’Acri is Deputy Head of Division of the Stress Test Modelling Division at the European Central Bank (ECB). Her research interests cover financial stability, empirical banking and stress testing, with a focus on the effectiveness of macroprudential policies, their interaction with monetary policy and bank stability, and the transmission of monetary policy measures through banks. She has published several articles in academic journals on the interaction of monetary and macroprudential policies, on interest rate risks for banks and on the banking sector’s adjustment to the Covid-19 crisis. A graduate of the University College London, Costanza holds a PhD and a Master’s degree in Political Economy from the London School of Economics.

Tamarah Shakir is the Deputy Head of the Systemic Risks and Financial Institutions division at the ECB, and part of her role is to lead production of the semi-annual Financial Stability Review. Prior to joining the ECB in 2019, she worked for over a decade at the Bank of England holding various positions in the financial stability, monetary analysis and markets departments, and previously worked at the British Embassy in Washington DC.

Gabriela Šílová is an Economist at Morgan Stanley. Previously, and while this paper has been written, she was a Research analyst at the Monetary Policy Strategy division at the European Central Bank. Prior to that, she worked at J.P. Morgan, first as an analyst in Wholesale Payments division, and then, as a Junior corporate banker in the Global Corporate Bank covering multinational corporations. Gabriela holds an MPhil degree in Economics from the University of Cambridge.

Oscar Soons is a Financial Stability Analyst at the European Central Bank and a PhD candidate at the University of Amsterdam. Oscar holds a MPhil in Economics from the Tinbergen Institute. His research interests cover international economics, banking, and financial regulation. He has a particular interest in economic policy in the EMU.

Alexia Ventula Veghazy is a Research Analyst in the Monetary Policy Strategy division at the European Central Bank (ECB). She joined the ECB in 2014, where she has worked in the European Systemic Risk Board (ESRB) and the Single Supervisory Mechanism (SSM), before joining her current division in 2016. In her current role, Alexia contributes to the analysis of the impact of non-standard monetary policy measures and the transmission of monetary policy in money markets as well as of the monetary policy implications of digital currencies. Alexia is a Ph.D. candidate at Goethe University Frankfurt.

1.     This Policy Note provides a summary of Adalid et al. (2022) and is published simultaneously by Central Banking. It should not be reported as representing the views of the European Central Bank (ECB) or the Eurosystem. Gabriela Silova worked on this paper while employed by the ECB and has in the meantime left the ECB and joined Morgan Stanley. Morgan Stanley disclaimer: “This paper was written in Gabriela Silova’s individual capacity and is not related to her role at Morgan Stanley. The analysis, content and conclusions set forth in this paper are those of the authors alone and not of Morgan Stanley or any of its affiliate companies. The authors alone are responsible for the content.” Carolina López-Quiles worked on this paper while employed by the ECB and has in the meantime left the ECB and joined the IMF. IMF disclaimer: “The views expressed in this paper do not necessarily reflect the views of the International Monetary Fund, its Management, or its Executive Directors.”
2.     To construct the scenarios, we make illustrative assumptions about different use purposes (e.g. retail payments, storage of value) and different demand intensities across sectors and money instruments (e.g. deposits and banknotes). For details, see Adalid et al. (2022). For the “capped” scenario (Take-up C), it is assumed that all residents exhaust a €3,000 limit on their individual holdings whereas non-residents visiting the euro area can hold digital euro exclusively for retail payment purposes. The aggregate figure for this scenario should be understood as an upper bound, as in practice there is a sizeable proportion of euro area citizens that do not hold €3,000 in bank deposits or cash. Adalid et al. (2022) also consider alternative limits (e.g. €5,000 and €10,000). 
3.     See, for example, the equivalence result in Brunnermeier and Niepelt (2019).
4.     A bank’s reaction to CBDC demand is simulated using a constrained optimisation model in which a bank is expected to minimise its funding costs, subject to a liquidity constraint, a collateral constraint, a bank specific and system-wide reserve constraints. In the simulation, banks will resort to the cheapest funding option unless they are faced with a constraint. For details, see Adalid et al. (2022).
5.     It is assumed that a bank wants to hold a voluntary buffer above its regulatory requirement (LCR and NSRF) which is at least as high as half of its current liquidity buffer.
6.     A 3-factor Fama-French model is fitted to individual euro area banks’ stock market returns at a daily frequency to identify potentially abnormal returns around events related to the digital euro, or digital currencies more in general. Returns are classified as abnormal to the extent that they deviate from the returns explained by the regularities captured by Fama-French factors. See Adalid et al (2022), and Burlon, Montes-Galdón, Muñoz and Smets (2022) for further details.
7.     See ECB (2020).
8.     Using transaction level data and controlling for potentially confounding factors such as loan demand. See Burlon, Montes-Galdón, Muñoz and Smets (2022) for further details.
9.     See Panetta (2021).
10.     See Adalid, Ramón, et al. "Central bank digital currency and bank intermediation." ECB Occasional Paper 2022/293 (2022) for further details on the assumptions and specification of the model.
11.     See Muñoz and Soons (2022) for a detailed description of the model and its findings. The set-up is based on the Diamond and Dybvig (1983) framework. 

SUERF Policy Notes (SPNs) focus on current financial, monetary or economic issues, designed for policy makers and financial practitioners, authored by renowned experts. The views expressed are those of the author(s) and not necessarily those of the institution(s) the author(s) is/are affiliated with.

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