Monetary policy at work: Security and credit application registers evidence
Jose-Luis Peydro (),
Andrea Polo () and
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Monetary policy transmission may be impaired if banks rebalance their portfolios towards securities to pursue e.g. risk-shifting or liquidity hoarding. We identify the bank lending and risk-taking channels by exploiting – Italian’s unique – credit and security registers. In crisis times, with softer ECB’s monetary policy conditions, less capitalized banks increase securities over credit supply, with associated firm-level real effects. However, less capitalized banks buy securities with lower yield (haircuts), even within securities with identical regulatory risk weights, thus reaching-for-safety/liquidity. Results are only present in marked-to-market portfolios. The evidence suggests that liquidity and risk-bearing capacity – rather than riskshifting or regulatory arbitrage – are key drivers of banks’ behavior. Differently, in pre-crisis times, securities do not crowd-out loan application granting by less capitalized banks.
Keywords: monetary policy; securities; loan applications; bank capital; reach-for-yield; held to maturity; available for sale; trading book; haircuts; regulatory arbitrage; sovereign debt. (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
Date: 2017-04, Revised 2018-08
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Working Paper: Monetary policy at work: Security and credit application registers evidence (2017)
Working Paper: Monetary Policy at Work: Security and Credit Application Registers Evidence (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1565
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