Koenig, PhilippSchliephake, Eva2021-12-132021-12-132021-09-20http://hdl.handle.net/10400.14/36172We consider a standard banking model with agency frictions to simultaneously study the weakening and reversal of monetary transmission and banks’ risk-taking in a low-interest environment. Both, weaker monetary transmission and higher risk-taking arise because lower policy rates impair banks’ net worth.The pass-through to deposit rates, the level of excess reserves and the extent of the agency problem between banks and depositors are crucial determinants of monetary transmission. If the deposit pass-through is sufficiently impaired, a reversal rate exists. For policy rates below the reversal rate further interest rate reductions lead to a disproportionate increase in risk-taking and a contraction in loan supply.engMonetary policyBank lendingRisk-taking channelReversal ratepreprint10.2139/ssrn.3925073