The Spillovers of LSAPs on Banks in the Euro Area

Marco Graziano (), Marius Koechlin () and Andreas Tischbirek

No 2026-005, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We study the spillovers of large-scale asset purchases (LSAPs) in the U.S. on financial intermediation in the euro area using bank-level supervisory data and high-frequency identified policy surprises. Our detailed panel data permit us to trace the impact of LSAPs through bank balance sheets. We find that the Federal Reserve affects credit provision in the euro area through a channel that we refer to as the ``international bank capital channel'' of unconventional monetary policy. In response to an LSAP shock that leads to a steepening of the U.S. Treasury yield curve, the Treasury positions of euro area banks shrink, capital ratios worsen, and banks that are less well capitalized contract their lending relative to banks that are better capitalized. Our results are consistent with an important role of revaluation effects, imperfect risk hedging, and credit as an adjustment margin for banks in the proximity of regulatory capital constraints.

Keywords: U.S. Treasury securities; Monetary policy transmission; Capital requirements; Asset purchase operations (search for similar items in EconPapers)
JEL-codes: E52 F42 F44 G21 (search for similar items in EconPapers)
Pages: 52 p.
Date: 2026-01-16
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:102399

DOI: 10.17016/FEDS.2026.005

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