In particular, the removal of deposit rate ceilings
places less of the burden of rationing available housing credit on quantitative restrictions and more on mortgage rates.
Five policy variables were included in our analysis: the bank rate (BR), the average lending rate ceiling
(ALRC), the savings deposits rate floor (SDRF), the required cash reserve ratio (RHO), and the stipulated government securities ratio (SGSR).
Second, deposit rate ceilings
would bind, and credit rationing would occur (lenders effectively would require larger down payments, exacerbating the first problem).
This paper demonstrates that the effect of interest rate ceilings
depends on the restrictions imposed by other financial regulations and visa versa, and that the effect of regulation, in turn, depends on the specifics of the loan transaction.
In the early 1980s, several banks moved their credit card operations to states that had raised or removed rate ceilings
on credit cards.
In addition, some other concerns relating to possible politically motivated interference of the banking system, including but not limited to a distressed debt exchange by the government, retaliatory measures against institutions that supported the strike of early 2003, as well as directed lending and interest rate ceilings
, have diminished as these actions have not materialized.
Similarly, reimposing deposit rate ceilings
for less-than-well-capitalized banks runs the risk of distorting bank decisionmaking and creating exactly the inefficiencies that the Congress sought to remove through the Depository Institutions Deregulation Committee.
Interest rate ceilings
and/or floors may also be implemented for FRN issuance, as outlined in the corresponding pricing supplement.
And the increased sensitivity to interest rates of household interest income, owing to the removal of deposit rate ceilings
, and of household interest payments, owing to the growing share of adjustable-rate financial liabilities, may have had some bearing on consumption behavior.