The Impact of Monetary Conditions on Bank Lending to Households

72 Pages Posted: 1 Apr 2019

See all articles by Győző Gyöngyösi

Győző Gyöngyösi

Kiel Institute for the World Economy

Steven Ongena

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

Ibolya Schindele

Magyar Nemzeti Bank; Central European University

Date Written: March 2019

Abstract

We study the impact of monetary conditions on the supply of mortgage credit by banks to households. Using comprehensive credit register data from Hungary, we first establish a "bank-lending-to-households" channel by showing that monetary conditions affect the supply of mortgage credit in volume. We then study the impact of monetary conditions on the composition of mortgage credit along its currency denomination and borrower risk. We find that expansionary domestic monetary conditions increase the supply of mortgage credit to all households in the domestic currency and to risky households in the foreign currency. Because most households are unhedged, bank lending in multiple currencies may involve additional risk taking. Changes in foreign monetary conditions affect lending in the foreign currency more than in the domestic currency, and also differ in their compositional impact along firm risk.

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

JEL Classification: E51, F3, G21

Suggested Citation

Gyöngyösi, Győző and Ongena, Steven R. G. and Schindele, Ibolya, The Impact of Monetary Conditions on Bank Lending to Households (March 2019). CEPR Discussion Paper No. DP13616, Available at SSRN: https://ssrn.com/abstract=3363529

Győző Gyöngyösi (Contact Author)

Kiel Institute for the World Economy ( email )

Kiellinie 66
Kiel, Schleswig-Hosltein 24105
Germany

Steven R. G. Ongena

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

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

Central European University ( email )

Nádor u. 9.
Budapest, 1051
Hungary

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