CENTRAL BANK DIGITAL CURRENCIES AND COMMERCIAL BANK DEPOSIT DISINTERMEDIATION: STRUCTURAL IMPLICATIONS FOR FINANCIAL STABILITY IN OECD ECONOMIES

This paper aims to explore the structural impact of commercial bank deposit funding in OECD economies in connection with the issuance of retail central bank digital currency (CBDC), focusing particularly on the parameters of design adopted by prominent central banks in the context of 2020-2024. The study is based on surveys by the Bank for International Settlements, working papers by the European Central Bank and the Bank of England, as well as balance sheet data by the European Banking Authority, in developing an analytical framework for linking CBDC holding limits to expected deposit displacement at an institutional level. The empirical findings of this study indicate that the introduction of unrestricted retail CBDC could lead to a reduction in aggregate retail deposits held by commercial banks of up to 24-37 percent, having significant negative structural impacts in terms of bank net interest margins. The study concludes that two-tier CBDC structure, imposing account-level CBDC holding limits, as well as restricting the issuance of interest-bearing CBDC, are considered to be prominent in mitigating disintermediation risks. The findings carry direct implications for financial stability authorities seeking to facilitate the transition to digital sovereign money without disrupting the deposit-based funding model that underpins bank credit supply.