Negative rates, monetary policy transmission and cross-border lending via international financial centres

Desislava Andreeva (), Andra Coman (), Mary Everett, Maren Froemel (), Kelvin Ho, Simon Lloyd, Baptiste Meunier, Justine Pedrono, Dennis Reinhardt, Andrew Wong, Eric Wong and Dawid Żochowski
Additional contact information
Desislava Andreeva: European Central Bank
Andra Coman: European Central Bank
Mary Everett: Central Bank of Ireland
Maren Froemel: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Justine Pedrono: Banque de France
Andrew Wong: Hong Kong Monetary Authority
Eric Wong: Hong Kong Monetary Authority

No 1010, Bank of England working papers from Bank of England

Abstract: We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data from international financial centres (IFCs) – the United Kingdom, Hong Kong and Ireland – we examine how NIRP in the economies where banks have their headquarters influences cross-border lending from financial-centre affiliates. We find that NIRP impairs the bank-lending channel for cross‑border lending to non-bank sectors, especially for those banks that have only a weak deposit base in IFCs – and are thus relatively more exposed to NIRP in their headquarters. Using euro-area data, including bank-level data from France, we find that NIRP does not influence overall cross-border lending from banks’ headquarters’ economies, but NIRP does impair lending to financial sectors based in IFCs. This impairment is stronger for banks with a large deposit base in headquarter economies exposed to NIRP.

Keywords: Bank lending; cross-border lending; international financial centres; monetary policy; negative interest rates; risk-taking. (search for similar items in EconPapers)
JEL-codes: E52 F34 F36 F42 G21 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2023-01-06
New Economics Papers: this item is included in nep-ban, nep-des, nep-eec, nep-mac and nep-mon
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Working Paper: Negative rates, monetary policy transmission and cross-border lending via international financial centres (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1010

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