Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300517 
Year of Publication: 
2024
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 7/2024
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We study the effect of collateral eligibility of corporate loans on the pricing of these loans by banks in Finland. Speciftcally, we investigate whether loans that are pledgeable as collateral for central bank borrowing have lower liquidity premia and thus lower interest rates. For identiftcation, we utilize two unanticipated changes in the collateral framework of the Bank of Finland after the COVID-19 pandemic in 2020 and loanlevel corporate credit data from the Finnish implementation of Anacredit. Our main result is that we do not ftnd evidence that collateral pool expansions by the central bank signiftcantly affected interest rates paid by borrowers. The result contrasts with recent ftndings that imply signiftcant effects of similar collateral pool expansions on credit supply. We hypothesize that differences in the institutional setting and economic environment between countries may explain the contradictory results. Our ftndings show that collateral policies may not have similar effects on credit pricing in all circumstances.
Subjects: 
monetary policy
collateral framework
credit pricing
interest rates
eligibility
JEL: 
E43
E52
G21
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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