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Negative rates, monetary policy transmission and cross-border lending via international financial centres

Author

Listed:
  • Andreeva, Desislava

    (European Central Bank)

  • Coman, Andra

    (European Central Bank)

  • Everett, Mary

    (Central Bank of Ireland)

  • Froemel, Maren

    (Bank of England)

  • Ho, Kelvin

    (Hong Kong Monetary Authority)

  • Lloyd, Simon

    (Bank of England)

  • Meunier, Baptiste

    (Banque de France and European Central Bank)

  • Pedrono, Justine

    (Banque de France)

  • Reinhardt, Dennis

    (Bank of England)

  • Wong, Andrew

    (Hong Kong Monetary Authority)

  • Wong, Eric

    (Hong Kong Monetary Authority)

  • Żochowski, Dawid

    (European Central Bank)

Abstract

We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data from international financial centres (IFCs) – the United Kingdom, Hong Kong and Ireland – we examine how NIRP in the economies where banks have their headquarters influences cross-border lending from financial-centre affiliates. We find that NIRP impairs the bank-lending channel for cross‑border lending to non-bank sectors, especially for those banks that have only a weak deposit base in IFCs – and are thus relatively more exposed to NIRP in their headquarters. Using euro-area data, including bank-level data from France, we find that NIRP does not influence overall cross-border lending from banks’ headquarters’ economies, but NIRP does impair lending to financial sectors based in IFCs. This impairment is stronger for banks with a large deposit base in headquarter economies exposed to NIRP.

Suggested Citation

  • Andreeva, Desislava & Coman, Andra & Everett, Mary & Froemel, Maren & Ho, Kelvin & Lloyd, Simon & Meunier, Baptiste & Pedrono, Justine & Reinhardt, Dennis & Wong, Andrew & Wong, Eric & Żochowski, Dawi, 2023. "Negative rates, monetary policy transmission and cross-border lending via international financial centres," Bank of England working papers 1010, Bank of England.
    • Handle: RePEc:boe:boeewp:1010
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank lending; cross-border lending; international financial centres; monetary policy; negative interest rates; risk-taking.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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