Quantitative easing, accounting and prudential frameworks, and bank lending

Andrea Orame (), Rodney Ramcharan () and Roberto Robatto
Additional contact information
Andrea Orame: Bank of Italy
Rodney Ramcharan: University of Southern California

No 1412, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study whether regulation that relies on historical cost accounting (HCA) rather than mark-to-market accounting (MMA) to insulate banks' net worth from financial market volatility affects the transmission of quantitative easing (QE) through the bank lending channel. Using detailed supervisory data from Italian banks and taking advantage of a change in accounting rules, we find that HCA makes banks significantly less responsive to QE than MMA. Hence, while HCA can insulate banks' balance sheets during periods of distress, it also weakens the effectiveness of unconventional monetary policy in reducing firms' credit constraints through the bank lending channel.

Keywords: unconventional monetary policy; bank lending channel; sovereign default premia; regulatory capital; historical cost accounting (search for similar items in EconPapers)
JEL-codes: E52 G28 M48 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/temi-dis ... 412/en_tema_1412.pdf (application/pdf)

Related works:
Working Paper: Quantitative easing, accounting and prudential frameworks, and bank lending (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1412_23

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().