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Size of banks as a factor which impacts the efficiency of the bank lending channel

Author

Listed:
  • Filip Œwita³a

    (Faculty of Management, University of Warsaw)

  • Iwona Kowalska

    (Faculty of Management, University of Warsaw)

  • Karolina Malajkat

    (Collegium of Socio-Economics, Warsaw School of Economics)

Abstract

In most economies banking sector plays the major role in the financial system. Therefore, it is of great importance to analyse and understand the mechanism of transmission of monetary policy and its impact on the banking sector. One of possible repercussions of changing the level of official interest rates is an ability to influence the size of bank lending, by means of the bank lending channel. The key aspect our research is a throughout understanding of functioning of the bank lending channel, with the main goal of this study being an examination of efficiency of monetary policy transmission through bank lending channel depending on the size of banks in the sector. This paper examines the abovementioned relation using annual data from 1995-2015 by 1709 commercial and cooperative banks from 27 EU countries and analyzing them in various econometric models. The results indicate that there is a positive impact of the bank's size on loan growth (defined as the bank size increases, the impact of changes in interest rates in the bank’s lending policy is getting smaller), however, interaction between the variables size and the interest rate, was proved to be insignificant (in the group of all analysed banks, as well as in commercial and cooperative banks separately).

Suggested Citation

  • Filip Œwita³a & Iwona Kowalska & Karolina Malajkat, 2019. "Size of banks as a factor which impacts the efficiency of the bank lending channel," Faculty of Management Working Paper Series 62019, University of Warsaw, Faculty of Management.
    • Handle: RePEc:sgm:fmuwwp:62019
    as

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    References listed on IDEAS

    as
    1. Nasha Ananchotikul & Dulani Seneviratne, 2015. "Monetary Policy Transmission in Emerging Asia: The Role of Banks and the Effects of Financial Globalization," PIER Discussion Papers 7., Puey Ungphakorn Institute for Economic Research, revised Nov 2015.
    2. Nasha Ananchotikul & Dulani Seneviratne, 2015. "Monetary Policy Transmission in Emerging Asia: The Role of Banks and the Effects of Financial Globalization," IMF Working Papers 2015/207, International Monetary Fund.
    3. Claessens, Stijn & Ghosh, Swati R. & Mihet, Roxana, 2013. "Macro-prudential policies to mitigate financial system vulnerabilities," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 153-185.
    4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    5. Nasha Ananchotikul & Dulani Seneviratne, 2015. "Monetary Policy Transmission in Emerging Asia: The Role of Banks and the Effects of Financial Globalization," PIER Discussion Papers 7, Puey Ungphakorn Institute for Economic Research.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    loan supply; capital ratio; monetary policy; bank lending channel; bank assets;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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