The effects of the ECB’s unconventional monetary policies from 2011 to 2018 on banking assets

We examine the effects of all three major European Central Bank (ECB) unconventional monetary policies since 2011 for euro area banks’ holdings of loans, government securities and cash deposited in central banks. The three ECB policies are longer-term refinancing operations (LTROs), the asset purchase programmes and the ECB’s interest rate on its deposit facility. We also compare the responses of non-crisis and crisis countries to these policies. Our evidence indicates that the ECB’s unconventional monetary policy measures increased bank lending across the euro area countries. The second round of LTROs, also known as targeted LTROs (TLTROs), were conditional on banks increasing their lending. This change had a substantially larger effect on total lending by banks. The computed effects of the LTROs and TLTROs, based on average size, indicate that in non-crisis countries LTROs increased bank loans by 7.6% of assets and TLTROs increased bank loans by 16.4% of assets, whereas in crisis countries the increases were 8.4% and 14.6% for LTROs and TLTROs, respectively. We find that both LTROs and TLTROs were associated with decreases in government securities held by banks in non-crisis countries, while the LTROs were associated with increases in government securities held by banks in crisis countries.