The asset reallocation channel of quantitative easing. The case of the UK

Simone Giansante, Mahmoud Fatouh and Steven Ongena

Journal of Corporate Finance, 2022, vol. 77, issue C

Abstract: We investigate the impact of the Bank of England's asset purchase program (APP) on the composition of assets of UK banks with unique data on the received reserves injections. The Monetary Policy Committee (MPC) didn’t expect there to be strong transmission of the APP’s impact through the bank lending channel. We find that compared to the control group, treated banks reallocated their assets towards lower risk-weighted investments, such as government securities, but did not provide more credit to the real economy. Overall, our findings suggest that when banks are not adequately capitalised, risk-based capital constraints can limit the effectiveness of expansionary unconventional monetary policies and provide incentives for carry trade activities.

Keywords: Finance; Monetary policy; Quantitative easing; Bank lending (search for similar items in EconPapers)
JEL-codes: E51 G21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:77:y:2022:i:c:s0929119922001377

DOI: 10.1016/j.jcorpfin.2022.102294

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