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Removing it would raise banks' funding costs.
First, funding costs are likely to remain high.
Banks' funding costs have fallen, theoretically allowing them to pass the benefit to clients.
If implemented, both are likely to raise European banks' funding costs.
That has a knock-on effect on banks' funding costs and their willingness to lend.
Repeating that tactic would risk deposit flight from peripheral banks and a sharp increase in banks' funding costs.
That would reduce banks' funding costs and encourage them to make more loans, keeping the economy from falling into recession.
Such banks' funding costs are normally based on government bond yields coupled with a premium.
These bonds are aimed at reducing banks' funding costs and thawing frozen credit markets.
We develop a dynamic optimization framework to assess the impact of funding costs on credit swap investments.
So have steeper funding costs.
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