CBDC and bank profitability in Norway : An empirical study on the impact of Central Bank Digital Currency on bank profitability in Norway

Abstract

In our empirical study, we examine the impact of a Central Bank Digital Currency on the profitability of Norwegian banks, building on the analytical approach developed by Bellia and Calès (2023). We select a sample of Norwegian banks, with data over the past decade (2013-2022). We assess the sensitivity of bank profitability in regard to deposit withdrawals following CBDC introduction. Using quantile regressions, we estimate the conditional profit distribution of a representative bank. We then introduce a shock factor on the volume of deposits that would be substituted by CBDC. Our findings indicate that banks are not significantly affected by a low adoption rate of CBDC. However, the large demand scenarios indicate that a high adpotion rate may pose challenges, especially for small banks that rely heavily on deposits.