No abstract

Is the transmission of monetary policy to bank lending heterogeneous across euro area countries? is paper employs annual bank level data to test whether the bank lending channel of monetary policy was heterogeneous in the euro area over the period 2007-2016. To do so it follows a simple procedure that allows direct testing of how monetary policy a ected similar banks located in di erent countries. Results indicate that the transmission of monetary policy to bank lending was heterogeneous across countries that were di erently exposed to the sovereign debt crisis. On average, the same 1% cut in the policy rate led to a 1.6% increase in lending by banks located in non-stressed countries as opposed to a 0.4% increase for banks located in countries under severe sovereign stress. Unconventional monetary policy -as captured by the ECB shadow rate -was also unevenly transmi ed to bank lending. Exposure to sovereign risk is identi ed as a key source of heterogeneity. Within stressed countries, banks with larger sovereign exposures reacted to monetary easing by expanding lending by less than banks with smaller exposures. As a result, monetary accommodation was smoothly transmi ed to lending only by banks with limited exposure to sovereign risk. In response to the same 1% policy rate cut, the credit expansion of highly exposed stressed countries banks was instead 2.75% weaker than that of banks in non-stressed countries.ese ndings support existing evidence on sovereign risk having direct adverse consequences for bank lending and highlight the extent to which sovereign risk aggravated heterogeneities in the transmission on monetary policy to the real economy via the banking system during the euro area debt crisis.

is paper examines the impact of bank competition on rms' access to credit using a large panel of 900 banks matched to almost 60.000 rms across the euro area over the period 2010-2016. Results provide empirical support for the market power hypothesis whereby low interbank competition worsens rms' credit conditions. We nd that higher bank market power is associated with lower short-term bank credit and higher trade credit for customer rms. Furthermore, high bank market power is especially detrimental for small, low quality and opaque rms, suggesting that lower inter-bank competition exacerbates the nancial constraint of borrowers that are more exposed to information problems. By contrast, we nd limited evidence consistent with the information hypothesis: among rms related to banks with high market power, only those served by small and local cooperatives obtain more bank credit. is nding highlights the relative importance of specialisation, ownership structure and local outreach in favouring credit relationships between borrowers and lenders.