Global financial institutions play an important role in channeling funds across countries and, therefore, transmitting monetary policy from one country to another. In this paper, we study whether such international transmission depends on financial institutions' business models. In particular, we use Dutch, Spanish, and U.S. confidential supervisory data to test whether the transmission operates differently through banks, insurance companies, and pension funds. We find marked heterogeneity in the transmission of monetary policy across the three types of institutions, across the three banking systems, and across banks within each banking system. While insurance companies and pension funds do not transmit home-country monetary policy internationally, banks do, with the direction and strength of the transmission determined by their business models and balance sheet characteristics. JEL classification: E5, F3, F4, G2.

Countercyclical long-term investment strategies of insurance companies and pension funds (ICPFs) can support the stability of the financial system. Yet there is limited understanding of how ICPFs invest during market shocks, such as the global financial crisis and the European sovereign debt crisis. The intention of this paper is to fill that lacuna by investigating Dutch ICPFs' equity and sovereign bond portfolios. A first analysis shows that while ICs massively sold equities during the crisis, PFs kept buying equities as markets tumbled. Results from our regression analysis over a longer time horizon suggest procyclical behaviour by ICs, while for PFs we do not find evidence for procyclical or countercyclical investment behaviour. Moreover, both ICs and PFs sold their affected sovereign bonds prior to a rating downgrade. This could be considered as destabilising at a macro-level, as it may accelerate the deteriorating financing conditions of the affected countries.

Global financial institutions play an important role in channeling funds across countries and, therefore, transmitting monetary policy from one country to another. In this paper, we study whether such international transmission depends on financial institutions' business models. In particular, we use Dutch, Spanish, and U.S. confidential supervisory data to test whether the transmission operates differently through banks, insurance companies, and pension funds. We find marked heterogeneity in the transmission of monetary policy across the three types of institutions, across the three banking systems, and across banks within each banking system. While insurance companies and pension funds do not transmit home-country monetary policy internationally, banks do, with the direction and strength of the transmission determined by their business models and balance sheet characteristics.

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