What is the Impact of a Major Unconventional Monetary Policy Intervention?

Carlo Alcaraz, Stijn Claessens (), Gabriel Cuadra, David Marques-Ibanez and Horacio Sapriza

No 25-07, Working Paper from Federal Reserve Bank of Richmond

Abstract: How does the credible announcement of an unconventional monetary policy intervention affect bank lending standards during crises? We use a major central bank announcement, the "whatever it takes" speech of the European Central Bank President that boosted the capital of banks, as a natural experiment. We compare changes in lending standards of subsidiaries of euro area versus other banks in a third country, Mexico. The speech reversed a prior trend of euro area banks augmenting their risk-taking via loan growth, lending rates, and credit risk. Our findings show that policies that amount to capitalization can reduce risk-taking in times of stress, adding a new dimension to the bank capital channel.

Keywords: monetary policy; financial institutions and regulation (search for similar items in EconPapers)
JEL-codes: E51 F34 G21 (search for similar items in EconPapers)
Pages: 63
Date: 2025-09
New Economics Papers: this item is included in nep-mac and nep-mon
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DOI: 10.21144/wp25-07

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