The Effect of Emergency Liquidity Assistance (ELA) on Bank Lending During the Euro Area Crisis

Gibson, Heather D.; Hall, Stephen G.; Petroulas, Pavlos; Spiliotopoulos, V.; Tavlas, George S.

doi:10.2139/ssrn.4142949

Cited by 4 publications

(3 citation statements)

References 18 publications

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“…Empirical assessments of the impact of ELA on the central banks' important magnitudes are non-existent and so, this is the first paper to fill the gap. The most recent explorations of the effect of ELA on bank lending in 11 Euro area countries during the financial crisis were done by Mourmouras and Kostika (2018), at the Central Bank of Greece, and Gibson et al (2020). The latter paper, however, focuses on bank lending and the real aspects (GDPs) of these economies.…”

Section: Introductionmentioning

confidence: 99%

Assessing the effectiveness of the emergency liquidity assistance tool in the euro area

Kostika¹,

Laopodis

2020

Int. J Fin Econ

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We examine the role and the efficiency of the emergency liquidity assistance (ELA) tool in the Euro area which has been used to confront the contagion in the banking sector and the illiquid financial market conditions. We study four European countries (Belgium, Cyprus, Greece, and Ireland), which have received substantial ELA since the 2008 financial crisis. Through Bayesian VAR models, we seek to determine the effectiveness of national central bank lending, which includes the amount of ELA received by the domestic banking sector, an assessment of the direct effect of ELA on banks' liquidity and lending through deposits thus allowing banks to supply loans. In general, we find that the ELA tool was very effective in alleviating financial strains in these countries' central banks. For the Greek case, in particular, our findings indicate that the ELA was influenced not only from any changes in bank deposits but also from changes in the spread between the 10-year Greek and German government bond yields. Finally, the volume of non-performing loans in Greek banks was declining to capital injections to banks as their capital base was continually being restored through the ELA mechanism.

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Section: Introductionmentioning

confidence: 99%

Assessing the effectiveness of the emergency liquidity assistance tool in the euro area

Kostika¹,

Laopodis

2020

Int. J Fin Econ

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“…Gibson, Hall, Petroulas, Spiliotopoulos, and Tavlas (2020) examine the impact of ELA on bank lending and real GDP in an unbalanced panel using semi-annual data from eleven euro-area countries.…”

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confidence: 99%

Public and private liquidity during crises times: evidence from Emergency Liquidity Assistance (ELA) to Greek banks

Kotidis¹,

Malliaropulos²,

Papaioannou³

2022

Working Paper

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In a surprise move during a crisis, the ECB excluded Greek Government Bonds from the set of eligible collateral in monetary policy operations. In turn, Greek banks turned to Emergency Liquidity Assistance (ELA) to meet their funding needs. ELA replenished losses from all funding sources, consistent with its role as LOLR. However, in anticipation to a switch to ELA, banks reduced their interbank and corporate lending as a result of its higher cost and conditionality. Although multi-lender firms compensated for the associated credit crunch, single-lender firms that were not able to establish new lending relationships experienced a reduction in their exports.

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“…The data measure end-period funding received by each bank.10 See for exampleBernanke and Blinder (1988), Angeloni,Kashyap and Mojon (2003),Ehrmann and Gambacorta, Martinez-Pages, Sevestre and Worms (2003),Ehrmann and Worms (2004),Ashcraft (2006),Ivashina and Sharfstein (2008) andCohen-Cole et al (2008). A recent exception to the non-log specification isGibson et al (2019).…”

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confidence: 99%

On the Effects of the Ecb's Funding Policies on Bank Lending and the Demand for the Euro as an International Reserve

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The Effect of Emergency Liquidity Assistance (ELA) on Bank Lending During the Euro Area Crisis

Cited by 4 publications

References 18 publications

Assessing the effectiveness of the emergency liquidity assistance tool in the euro area

Assessing the effectiveness of the emergency liquidity assistance tool in the euro area

Public and private liquidity during crises times: evidence from Emergency Liquidity Assistance (ELA) to Greek banks

On the Effects of the Ecb's Funding Policies on Bank Lending and the Demand for the Euro as an International Reserve

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