Lending effects of the ECB’s asset purchases

•All individual trades of the ECB’s first asset purchase program, the SMP, are traced to the portfolios of all German banks five years before and after the program.•This exogenous shock to these banks is used to isolate causal lending effects.•Banks that held SMP securities increased corporate lendi...

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Bibliographic Details
Published in:Journal of monetary economics 2020-12, Vol.116, p.39-52
Main Author: Koetter, Michael
Format: Article
Language:English
Subjects:
Bank lending
SMP
Unconventional monetary policy
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Summary:•All individual trades of the ECB’s first asset purchase program, the SMP, are traced to the portfolios of all German banks five years before and after the program.•This exogenous shock to these banks is used to isolate causal lending effects.•Banks that held SMP securities increased corporate lending by approximately 4%.•The SMP caused aggregate lending, bank profits, and liquidity buffers to increase.•No evidence of increased credit risk can be observed. Between 2010 and 2012, the European Central Bank absorbed €218 billion worth of government securities from five EMU countries under the Securities Markets Programme (SMP). Detailed security holdings data at the bank level affirms an effective lending stimulus due to the SMP. Exposed banks contract household lending, but increase commercial lending substantially. Holding non-SMP securities from stressed EMU countries amplifies the commercial lending response. The SMP also improved liquidity buffers and profitability without compromising credit quality.
ISSN:0304-3932
1873-1295
DOI:10.1016/j.jmoneco.2019.08.019