In Lands of Foreign Currency Credit, Bank Lending Channels Run Through?

74 Pages Posted: 9 Oct 2014 Last revised: 22 Jul 2018

See all articles by Steven Ongena

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Ibolya Schindele

BI Norwegian Business School; Central Bank of Hungary

Dzsamila Vonnák

Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS)

Date Written: July 12, 2018

Abstract

We study the impact of monetary policy on the supply of bank credit when bank lending is also denominated in foreign currencies. Accessing a comprehensive supervisory dataset from Hungary, we find that the supply of bank credit in a foreign currency is less sensitive to changes in domestic monetary conditions than the equivalent supply in the domestic currency. Changes in foreign monetary conditions similarly affect bank lending more in the foreign than in the domestic currency. Hence when banks lend in multiple currencies the domestic bank lending channel is weakened and international bank lending channels become operational.

Keywords: bank balance-sheet channel, monetary policy, foreign currency lending

JEL Classification: E51, F3, G21

Suggested Citation

Ongena, Steven R. G. and Schindele, Ibolya and Vonnák, Dzsamila, In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? (July 12, 2018). CFS Working Paper, No. 474. Available at SSRN: https://ssrn.com/abstract=2507688 or http://dx.doi.org/10.2139/ssrn.2507688

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ibolya Schindele

BI Norwegian Business School ( email )

Oslo, 0442
Norway
+47 46 41 05 17 (Phone)
+47 46 41 08 01 (Fax)

Central Bank of Hungary ( email )

Szabadság tér 9.
Budapest, 1054
Hungary

Dzsamila Vonnák

Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS) ( email )

Budaorsi ut 45
Budapest, 1112
Hungary

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