The bank collateral channel of monetary policy: evidence from securities losses

Mariassunta Giannetti, Martina Jasova, Caterina Mendicino and Dominik Supera

Research Bulletin, 2026, vol. 145

Abstract: Monetary policy tightening generates valuation losses on banks’ securities portfolios, reducing the collateral available for interbank borrowing. Using detailed euro area data, we show that banks with larger securities losses during the 2022-23 monetary policy tightening cycle obtained less interbank funding and reduced lending to firms, even when losses did not affect regulatory capital. These effects were strongest for banks with limited liquidity buffers and high collateral utilisation. While internal capital markets partly shield domestic subsidiaries within banking groups, foreign subsidiaries receive less support, pointing to persistent fragmentation in cross-border liquidity allocation and uneven monetary policy transmission across the euro area. JEL Classification: G21, E43, E52, E58

Keywords: banking groups; foreign banks; interbank market; monetary policy tightening; securities losses (search for similar items in EconPapers)
Date: 2026-07
Note: 1774743
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