We cordially invite all employees of the Vistula Group of Universities to participate in the seminar of the Vistula Center for Advanced Studies (VCAS), about foreign banks and monetary policy. The lecture „Foreign Banks and the Bank Lending Channel” will be delivered by Piotr Denderski in English. We invite you on April 23 at 12:00 to room 318A.
We provide new evidence on the effects of monetary policy on loans using bank-level data on 429 banks in CEE economies between 1998 and 2012. Only domestic banks adjust their loans to changes in monetary policy. This is driven by the supply side as deposits in foreign banks do not react to monetary policy, hence the bank lending channel is only active in domestic banks. Contrary to conventional wisdom, foreign banks do not have to rely on parent banks’ funding to insulate against monetary policy shocks. Indeed, we find parent bank and its country characteristics are irrelevant for subsidiary’s lending.