Real Effects of Financial Market Integration: Evidence from an ECB Collateral Framework Change

47 Pages Posted: 1 Aug 2022 Last revised: 7 Feb 2023

See all articles by Pia Hüttl

Pia Hüttl

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin

Matthias Kaldorf

Deutsche Bundesbank

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2022


Does central bank collateral policy contribute to financial market integration? We address this question by exploiting that, in 2007, the European Central Bank replaced national collateral frameworks by a single list. Under the single list regime, euro area banks could pledge all euro area bank loans as collateral, not only domestic loans as before the framework change. Banks holding a large share of newly eligible cross-border bank loans increase loan supply compared to banks with smaller holdings to such loans. The additional credit supply is predominately targeted at previously eligible domestic borrowers, suggesting only a small effect on financial integration. However, we find evidence that firms which are highly exposed to affected banks experience a relaxation of borrowing constraints and increase their real activity. The effects of harmonized collateral policy, thus, closely resemble the effects of expansionary credit policy, while it was less successful in stimulating direct cross-border lending.

Keywords: Collateral policy, bank lending channel, financial integration, banking union, real effects

JEL Classification: E44,E52,E58,G20,G21

Suggested Citation

Hüttl, Pia and Kaldorf, Matthias, Real Effects of Financial Market Integration: Evidence from an ECB Collateral Framework Change (July 1, 2022). DIW Berlin Discussion Paper No. 2012, Available at SSRN: or

Pia Hüttl (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099

Matthias Kaldorf

Deutsche Bundesbank ( email )

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