We also find that banks which are less-well monitored and disciplined (i.e., subject to more moral hazard) not only take on more risk but they especially take it when interest rates are low. Low rates therefore imply excessive risk-taking. When rates are low not only do these banks take on more risk, but loan spreads are further reduced at these banks despite the higher ex-post realisation of credit risk.
The impact of short-term interest rates on risk-taking: hard evidence
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