Digital currencies, for example, could undermine commercial banks’ monopoly on creating inside money. 15 Negative interest rates, meanwhile, can have adverse consequences for banks’ profitability over time despite being extremely effective in complementing other non-conventional monetary policy instruments and helping central banks overcome the zero lower bound constraint. So far, the general equilibrium effects of negative rates have clearly dominated.
More generally, it is hard to believe that central banks keeping very large balance sheets for a considerable amount of time will not have an impact on financial intermediation. Looking forward, low productivity and ageing societies may mean that our economies have gravitated towards a low growth, low interest rate environment that may weigh more permanently on banks’ profits and, hence, financial stability.