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The bank collateral channel of monetary policy: evidence from securities losses

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  • Giannetti, Mariassunta
  • Jasova, Martina
  • Mendicino, Caterina
  • Supera, Dominik

Abstract

Monetary policy tightening generates valuation losses on banks’ securities portfolios, reducing the collateral available for interbank borrowing. Using detailed euro area data, we show that banks with larger securities losses during the 2022-23 monetary policy tightening cycle obtained less interbank funding and reduced lending to firms, even when losses did not affect regulatory capital. These effects were strongest for banks with limited liquidity buffers and high collateral utilisation. While internal capital markets partly shield domestic subsidiaries within banking groups, foreign subsidiaries receive less support, pointing to persistent fragmentation in cross-border liquidity allocation and uneven monetary policy transmission across the euro area. JEL Classification: G21, E43, E52, E58

Suggested Citation

  • Giannetti, Mariassunta & Jasova, Martina & Mendicino, Caterina & Supera, Dominik, 2026. "The bank collateral channel of monetary policy: evidence from securities losses," Research Bulletin, European Central Bank, vol. 145.
    • Handle: RePEc:ecb:ecbrbu:2026:0145:
    Note: 1774743
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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

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