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Deposit Funding and the Credit Channel of Monetary Policy

Author

Listed:
  • Matthieu Bussiere
  • Tommaso Gasparini
  • Guillaume Horny
  • Benoit Nguyen

Abstract

How does heterogeneity in deposit funding among banks influence the transmission of monetary policy to loan supply? To address this question, we exploit a bank-level panel dataset of more than 450 banks from 19 euro-area countries from 2007 to 2023. Our empirical findings reveal that banks with a higher reliance on deposit funding exhibit a more muted increase in lending rates following monetary policy tightening. These results are consistent with a mechanism in which deposit funding shapes bank loan supply.

Suggested Citation

  • Matthieu Bussiere & Tommaso Gasparini & Guillaume Horny & Benoit Nguyen, 2025. "Deposit Funding and the Credit Channel of Monetary Policy," Working papers 1029, Banque de France.
    • Handle: RePEc:bfr:banfra:1029
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    File URL: https://www.banque-france.fr/system/files/2025-12/WP1029_0.pdf
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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