Bank Lending and Policy Interactions—A Comprehensive Assessment for the G20 Countries

Dieter Gramlich, Meilan Yan and Dalu Zhang

International Journal of Finance & Economics, 2025, vol. 30, issue 4, 3500-3520

Abstract: This study examines the joint impact from supervisory requirements, monetary policies and rescue packages on the supply of bank loans. Evidence is obtained from conceptual considerations and the empirical investigation of G20 banks over the period 1995–2021. To prepare the analysis of interactions, we first address modelling concepts and consistently identify the effects on bank lending that come from each of the regulatory approaches in isolation. Second, we empirically assess the effects that result from the parallel application of policy actions. Short‐term liquidity ratios in combination with further variables mostly associate with positive interaction effects. In contrast, the joint assessment of long‐term liquidity ratios as well as leverage ratios with other policy actions usually provides negative effects. Overall, the results suggest that unconventional monetary policy and rescue actions can stimulate bank lending only after the institutions have restored their own stability. Interactions of policy actions matter, and both regulatory authorities and bank management should consider them.

Date: 2025
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