Bank Specialization and the Transmission of Euro Area Monetary Policy

Konrad Kuhmann
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Konrad Kuhmann: Latvijas Banka

No 2025/06, Working Papers from Latvijas Banka

Abstract: Bank lending is a key factor in the transmission of monetary policy to the real economy. Using granular loan data on the euro area, I analyze how bank specialization interacts with the effects of monetary policy on credit. I first document that bank lending in the euro area is characterized by a substantial degree of specialization. That is, banks tend to be over-exposed to borrowers in certain industries and of certain size. I also find that higher specialization is generally associated with more favorable lending conditions. Most importantly, banks partly insulate their preferred borrowers from the consequences of monetary policy. In particular, they adjust interest rates and lending relatively less strongly for borrowers from groups in which they specialize. My findings suggest that bank specialization is relevant for the aggregate and distributional consequences of monetary policy.

Keywords: Bank specialization; Bank lending; Monetary policy; AnaCredit (search for similar items in EconPapers)
JEL-codes: E51 E52 G21 (search for similar items in EconPapers)
Date: 2025-10-01
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Persistent link: https://EconPapers.repec.org/RePEc:ltv:wpaper:202506

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