'The Deposit Taker of Last Resort'

About Kilian Rieder

What are the consequences of making central bank reserves accessible to actors beyond the banking sector? We exploit novel micro data on deposit accounts historically held with the Bank of England by individuals and firms other than banks to study their role in a major financial panic. We document a sharp increase in the use of deposit accounts, driven by a surge in their convenience yield during the crisis. The expansion in the number of active accounts was fueled by individuals, while the intensive margin increase in balances came from firms. Recourse to central bank deposits was heterogeneous and persisted well beyond the panic, reflecting easy access, low opportunity costs, and positive network externalities. At the same time, retail borrowers seeking liquidity support from the Bank during the crisis preferred receiving loan proceeds in the form of cash rather than deposits.

Co-author: Pamfili Antipa (London School of Economics)