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

37 Pages Posted: 24 Feb 2016

See all articles by Leo de Haan

Leo de Haan

De Nederlandsche Bank

Philip Vermeulen

European Central Bank (ECB)

Jan Willem van den End

De Nederlandsche Bank

Multiple version iconThere are 2 versions of this paper

Date Written: February 23, 2016

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. The results also suggest that central bank liquidity has mitigated this effect most clearly on lending volumes. 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 Vermeulen, Philip and van den End, Jan Willem, Lenders on the Storm of Wholesale Funding Shocks: Saved by the Central Bank? (February 23, 2016). ECB Working Paper No. 1884. Available at SSRN: https://ssrn.com/abstract=2736935

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)

Philip Vermeulen

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jan Willem van den End

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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