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Economic Support during the COVID Crisis. Quantitative Easing and Lending Support Schemes in the UK

Author

Listed:
  • Mahmoud Fatouh

    (Bank of England)

  • Simone Giansante

    (University of Bath - School of Management)

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))

Abstract

We investigate how the interaction of the Brexit and COVID waves of the Bank of England’s quantitative easing with the leverage ratio capital requirements or government COVID lending support schemes affected bank business lending. We find that the former QE programme was particularly successful in increasing lending to nonfinancial businesses, except for QE-banks subject to the UK leverage ratio, suggesting that the latter ratio incentivized QE-banks to lend to business anyway. The government schemes helped expand lending especially to SMEs post QE COVID, indicating that complementing QE with other credit easing programmes can improve its impact on lending to the real economy. During COVID-stress, changes to the UK leverage ratio supported better market-making in securities markets, and additional QE liquidity boosted stronger repo market intermediation.

Suggested Citation

  • Mahmoud Fatouh & Simone Giansante & Steven Ongena, 2021. "Economic Support during the COVID Crisis. Quantitative Easing and Lending Support Schemes in the UK," Swiss Finance Institute Research Paper Series 21-54, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2154
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    Cited by:

    1. Mahmoud Fatouh & Simone Giansante & Steven Ongena, 2024. "Leverage ratio, risk‐based capital requirements, and risk‐taking in the United Kingdom," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 33(1), pages 31-60, February.
    2. Patrick Cheong-Iao Pang & Wenjing Jiang & Guanwen Pu & Kin-Sun Chan & Ying Lau, 2022. "Social Media Engagement in Two Governmental Schemes during the COVID-19 Pandemic in Macao," IJERPH, MDPI, vol. 19(15), pages 1-12, July.
    3. L. Kornher & T. Balezentis & F. G. Santeramo, 2024. "EU food price inflation amid global market turbulences during the COVID‐19 pandemic and the Russia–Ukraine War," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 46(4), pages 1563-1584, December.
    4. Zaghini, Andrea, 2024. "Unconventional green," Journal of Corporate Finance, Elsevier, vol. 85(C).
    5. Mahmoud Fatouh & Simone Giansante & Steven Ongena, 2023. "Leverage ratio and risk-taking: theory and practice," Bank of England working papers 1048, Bank of England.
    6. Giansante, Simone & Fatouh, Mahmoud & Ongena, Steven, 2022. "The asset reallocation channel of quantitative easing. The case of the UK," Journal of Corporate Finance, Elsevier, vol. 77(C).
    7. Ferentinos, Konstantinos & Gibberd, Alex & Guin, Benjamin, 2023. "Stranded houses? The price effect of a minimum energy efficiency standard," Energy Economics, Elsevier, vol. 120(C).
    8. Juan Cristóbal Campoy & Juan Carlos Negrete, 2023. "Quantitative easing rules as a means to achieve optimal levels of structural reforms and government deficits in a monetary union," The World Economy, Wiley Blackwell, vol. 46(9), pages 2755-2779, September.
    9. Jonathan Acosta-Smith & Benjamin Guin & Mauricio Salgado-Moreno & Quynh-Anh Vo, 2023. "Understanding climate-related disclosures of UK financial institutions," Bank of England working papers 1017, Bank of England.
    10. Andrea Zaghini, 2025. "Correction to: The Covid Pandemic in the Market: Infected, Immune and Cured Bonds," Journal of Financial Services Research, Springer;Western Finance Association, vol. 67(1), pages 53-53, April.

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    Keywords

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    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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