Economic support during the COVID crisis. Quantitative easing and lending support schemes in the UK

Mahmoud Fatouh; Simone Giansante; Steven Ongena

doi:10.1016/j.econlet.2021.110138

Economic support during the COVID crisis. Quantitative easing and lending support schemes in the UK

Mahmoud Fatouh, Simone Giansante, Steven Ongena

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Abstract

We investigate how UK bank business lending responded to the simultaneous use of quantitative easing, leverage ratio capital requirements, and government COVID lending support schemes. We find no evidence that the Brexit wave increased lending to nonfinancial businesses, compared to the previous waves, except for QE-banks subject to the UK leverage ratio, suggesting that the ratio incentivised QE-banks to lend to businesses. The government schemes helped expand lending especially to SMEs post the COVID wave, indicating that complementing QE with other credit easing programmes can reinforce 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.

Original language	English
Article number	110138
Journal	Economics Letters
Volume	209
Early online date	30 Oct 2021
DOIs	https://doi.org/10.1016/j.econlet.2021.110138
Publication status	Published - 31 Dec 2021

Bibliographical note

Funding Information:
The views expressed in this paper are those of the authors, and not necessarily those of the Bank of England or its committees. Ongena acknowledges financial support from ERC ADG 2016 - GA 740272 lending.

Keywords

Bank lending
Monetary policy
Quantitative easing

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.econlet.2021.110138

Economic support during the Covid crisis. Quantitative Easing and Lending Support Schemes in the UKAccepted author manuscript, 1.18 MBLicence: CC BY-NC-ND

Cite this

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abstract = "We investigate how UK bank business lending responded to the simultaneous use of quantitative easing, leverage ratio capital requirements, and government COVID lending support schemes. We find no evidence that the Brexit wave increased lending to nonfinancial businesses, compared to the previous waves, except for QE-banks subject to the UK leverage ratio, suggesting that the ratio incentivised QE-banks to lend to businesses. The government schemes helped expand lending especially to SMEs post the COVID wave, indicating that complementing QE with other credit easing programmes can reinforce 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.",

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Economic support during the COVID crisis. Quantitative easing and lending support schemes in the UK

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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