Adding to the contraction in the supply of loanable funds derived from retail depositors opting to hold CBDCs instead of bank accounts, loan demand could be affected too as a result of banks’ attempts to preserve margins by increasing their lending rates.
Moreover, as banks face a drop in the relatively stable component of funding represented by retail deposits, 3  regulatory requirements in place may force them to cut back on credit or hold a higher proportion of liquid assets, either of which would result in less resources available for lending. Secondly, the stability of the financial system may face important challenges.