Lenders on the Storm of Wholesale Funding Shocks: Saved by the Central Bank?

36 Pages Posted: 21 Jan 2015

See all articles by Leo de Haan

Leo de Haan

De Nederlandsche Bank

Jan Willem van den End

De Nederlandsche Bank

Philip Vermeulen

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: January 20, 2015

Abstract

We provide empirical evidence on banks’ responses to shocks in wholesale funding, using data of 181 euro area banks over the period August 2007 to June 2013. Banks’ adjustments of loan volumes and lending rates in response to funding liquidity shocks are analysed in a panel VAR framework. The results show that shocks in the securities and interbank markets have significant effects on loan rates and credit supply, particularly of banks in stressed countries. Central bank liquidity has mitigated this effect. Lending to non-financial corporations is more sensitive to wholesale funding shocks than lending to households. Moreover, bank characteristics matter for monetary transmission: loan growth of large banks that are typically more dependent on wholesale funding and of banks with large exposure to government bonds shows relatively stronger responses to wholesale funding shocks.

Keywords: banking/financial intermediation, financial crisis

JEL Classification: G21, G32

Suggested Citation

de Haan, Leo and van den End, Jan Willem and Vermeulen, Philip, Lenders on the Storm of Wholesale Funding Shocks: Saved by the Central Bank? (January 20, 2015). De Nederlandsche Bank Working Paper No. 456. Available at SSRN: https://ssrn.com/abstract=2553114 or http://dx.doi.org/10.2139/ssrn.2553114

Leo de Haan (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31 20 5243539 (Phone)
+31 20 5242514 (Fax)

Jan Willem van den End

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Philip Vermeulen

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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