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IMF-affiliated presenter: CBDC can both raise and erode bank deposits depending on who adopts it
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Summary
A theoretical model presented at the conference shows CBDC’s effect on bank deposits depends on two opposing forces: banks’ competitive response (raising deposit rates) and households’ choice to opt out of deposit accounts; baseline calibration implies a modest net deposit loss (about 4.2%) and only a small effect on lending.
A presenter at the session laid out a portfolio-choice model to study how a retail central bank digital currency (CBDC) could alter banks’ deposit funding and lending.
The presenter said the model isolates two forces. “Competition from CBDC forces banks to increase the deposit remuneration,” the presenter explained, describing the intensive margin by which banks raise rates and, in some cases, attract more deposits. But when fixed access costs and household heterogeneity are added, an extensive margin can dominate: “people may choose whether to hold CBDC or not or to hold deposits or not,” the presenter said, noting the possibility that some households would close deposit accounts and switch to CBDC.
In a U.S.-based calibration the paper sets the policy (bond) rate at 3% and models a population with about 80% banked. Under the presenter’s baseline parameters CBDC holdings reach roughly 3–3.5% of household wealth, banks raise deposit rates by about 50 basis points, and aggregate bank deposits fall by about 4.2%.
The presenter emphasized the result is parameter-dependent. Higher CBDC access costs or a poorer wealth distribution can blunt or reverse deposit outflows because banks have less incentive — and less ability — to raise deposit rates where many households are poor and marginal for deposit decisions.
On lending, the presenter added a simple lending and wholesale-funding layer and reported a very small quantitative effect on credit supply in the parameter space studied: lending changed by only about 0.18% in one calibration. The presenter attributed the muted lending response to the availability of wholesale funding in the model; if wholesale funding is expensive, banks would compete more aggressively for deposits and the effects could be larger.
The presenter closed by noting the model’s limits — it is static, abstracts from multi-sided payments externalities and richer dynamics — and recommended extensions and welfare analysis as next steps.
The session did not include formal votes or policy actions; the presentation focused on model structure, calibration choices, and sensitivity results.
