Bank Capital, Bank Lending, and Monetary Policy in the Euro Area

Kredit und Kapital, 2004

18 Pages Posted: 7 Feb 2009 Last revised: 16 Oct 2020

See all articles by Yener Altunbas

Yener Altunbas

University of Wales, Bangor

Gabe de Bondt

European Central Bank (ECB)

David Marques-Ibanez

European Central Bank (ECB)

Date Written: May 17, 2004

Abstract

This paper provides arguments and evidence in favour of the hypothesis that bank capital matters for euro area banks' loan response to a change in monetary policy. Bank-level panel data estimates for 1991-1999 show that the lending behaviour of the least-capitalised banks in France and Italy is more responsive to a change in monetary policy than that of better capitalised banks. The degree of capitalisation also matters for the monetary policy impact on lending of the key players in the German and euro area banking system. These findings suggest that the new Basle capital requirements can affect the monetary transmission channel through bank capital.

Keywords: bank capital; monetary policy; bank lending channel; bank balance sheet channel; panel data

JEL Classification: C23, E52, G21

Suggested Citation

Altunbas, Yener and de Bondt, Gabe and Marques-Ibanez, David, Bank Capital, Bank Lending, and Monetary Policy in the Euro Area (May 17, 2004). Kredit und Kapital, 2004, Available at SSRN: https://ssrn.com/abstract=658982

Yener Altunbas

University of Wales, Bangor ( email )

Bangor, Wales LL57 2DG
United Kingdom

Gabe De Bondt

European Central Bank (ECB) ( email )

Eurotower
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 13440 (Phone)
+44 69 1344 6000 (Fax)

David Marques-Ibanez (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)