Quantitative easing, global banks and the international bank lending channel

The current debate on the international transmission of shocks generated by quantitative easing (QE) programmes mainly focuses on the impact on financial markets' yields and returns. This paper adds to the literature by investigating the existence of an international bank lending channel activated by QE, focusing on the behaviour of US global banks. In particular, the empirical analysis explores the impact of the Federal Reserves' QE policy on lending by foreign branches of US banks. The findings reveal significant policy-induced liquidity spillovers via foreign lending during the QE policy implementation in the US, suggesting the existence of an international bank lending channel. The channel worked its way through different segments of the credit markets, having asymmetric effects on foreign host countries. Overall, our findings highlight the role of global banks in channelling QE-created liquidity across borders, adding pressure to increasing debt levels in foreign countries.