Bank Lending and Maturity: the Anatomy of the Transmission of Monetary Policy

Selva Bahar Baziki and Tanju Capacioglu

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: We study the effects of monetary policy decisions on banks’ loan issuance and maturity decisions using a unique matched firm-bank-loan level granular database. We find that changes in the policy rate impact both credit and maturity channels - an increase of 100 basis points reduces commercial loan volumes by 1.6% and maturities by 1.2%, with tighter monetary policy having a larger effect on both. Small banks, banks with relatively weaker capital and liquidity structures, and with weaker access to foreign funding are more sensitive to policy changes. Bank ownership types and loan currency denomination also create asymmetries in responses. Banks reflect these changes to firms with which they have longer established relationships or which have a healthier past credit performance to a lesser extent. A quasi-experimental analysis adds that the intense use of a collateral guarantee scheme has increased maturities at the time of tight monetary policy stance, reversing their long-run negative relationship. These results highlight the importance of the financial regulatory process on banks’ risk taking behavior, search-for yield appetites, identifying areas of potential systemic risk buildup, and finally policy design and coordination.

Keywords: Monetary policy; Transmission channel; Credit guarantee fund; Loan maturity; Bank type (search for similar items in EconPapers)
JEL-codes: E51 E58 G20 G21 G28 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:2005

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