Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278594 
Year of Publication: 
2023
Series/Report no.: 
ESRB Working Paper Series No. 144
Publisher: 
European Systemic Risk Board (ESRB), European System of Financial Supervision, Frankfurt a. M.
Abstract: 
We study whether regulation that relies on historical cost accounting (HCA) rather than mark-to-market accounting (MMA) to insulate banks' net worth from financial market volatility affects the transmission of quantitative easing (QE) through the bank lending channel. Using detailed supervisory data from Italian banks and taking advantage of a change in accounting rules, we find that HCA makes banks significantly less responsive to QE than MMA. Hence, while HCA can insulate banks' balance sheets during periods of distress, it also weakens the effectiveness of unconventional monetary policy in reducing firms' credit constraints through the bank lending channel.
Subjects: 
Unconventional monetary policy
bank lending channel
sovereign default premia
regulatory capital
historical cost accounting
JEL: 
G28
E52
M48
Persistent Identifier of the first edition: 
ISBN: 
978-92-9472-331-4
Document Type: 
Working Paper

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