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Presenter: CBDC design — service locations and limits — largely determines deposit crowding in Canadian estimates
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Summary
A structural estimation using Canadian microdata finds CBDC uptake and bank deposit crowding depend heavily on CBDC service locations, complementarity with other financial products, interest rate design and holding limits; scenario with branches/post offices as service points can reduce deposits by ~10% on average across banks.
A second paper presented a structural model estimated on Canadian household and branch-level data to study how a retail CBDC would compete with bank deposits.
The presenter described two attributes central to their counterfactuals: where people can access in-person services (service locations such as bank branches or Canada Post) and the lack of complementarity of CBDC with other financial products. “If all bank branches are used as service locations for CBDC, then it can crowd out bank deposits by around 10% on average across banks,” the presenter said, presenting the estimated aggregate impacts under alternative design choices.
Using Canadian Financial Monitor household survey data combined with branch-location data, the authors estimate households’ “home bank” preferences and show that branch networks and product complementarity matter for deposit choices. In counterfactuals, a non-interest CBDC with no service locations yields an aggregate CBDC share below 1%; using postal or branch networks raises that share to roughly 6–10%, and making CBDC interest-bearing raises uptake further.
The presenter also examined holding limits. Embedding holding constraints into the portfolio-allocation stage, they found that even a large limit (CAD 25,000) constrains a minority of households (roughly 13%) but can substantially reduce aggregate CBDC shares because higher-wealth households hold a disproportionate share of liquid assets.
The model shows heterogeneous bank responses: larger banks with higher initial market shares tend to raise deposit rates more and lose fewer deposits than smaller banks. The presenter concluded that CBDC design choices — service locations, interest, and holding limits — materially affect how much deposits would be crowded out and which banks would be most affected.
No policy decision was taken at the session; the presentation focused on estimation choices and counterfactual scenarios.
