The impact of monetary policy and macroprudential policy on corporate lending rates in the Euro area

Jan Hannes Lang, Marek Rusnák and Tobias Herbst

No 3057, Working Paper Series from European Central Bank

Abstract: We examine the differential impact of monetary policy and macroprudential policy on bank lending rates in the euro area, using granular corporate loan-level data for the period 2019-2023. We find three results: First, consistent with the predictions of a stylized theoretical model of bank lending rates, monetary policy exerts an order of magnitude larger impact on lending rates than macroprudential policy. Second, the effectiveness of monetary policy transmission weakens when interest rates are close to or below zero. Third, the impact of macroprudential policy on lending rates increases when banks have limited capital headroom above capital buffer requirements, indicating cautious lending behavior when banks get close to regulatory constraints. Our findings have important policy implications for the joint conduct of monetary and macroprudential policy. JEL Classification: G21, G28, E43, E52

Keywords: bank capitalization; credit supply; interest rate pass-through; loan-level data (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-eec and nep-mon
Note: 2731285
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253057

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