Non-standard monetary policy measures and bank systemic risk in the Eurozone

Modern central banking offers policymakers innovative tools to safeguard price stability and the normal functioning of the financial system. However, the unintended impact of the implementation of non-standard monetary policy measures, especially on systemic risk, remains underexplored from a microeconomic point of view. This study investigates the effect of non-standard monetary policy measures on systemic risk of listed financial institutions in the Euro area. Our results show the presence of the systemic risk-taking channel of monetary policy, whereby systemic risk increases following further enforcement of non-standard monetary policy measures, with the effect being stronger for smaller and undercapitalised banks. The results are robust to various alternative measures of bank systemic risk and non-standard monetary policy. Our findings bear critical policy implications for financial stability.