1. IBRN conference « The international bank lending channel of monetary policy » Discussion
Julien IDIER
Macroprudential policy division

2. Portfolio rebalancing
Short summary of the paper US
Monetary Policy
France / Italy
Bank lending activity
Bank lending channel UK
Portfolio rebalancing JP

3. How to test the 2 channels of transmission?
Bank lending channel:
Funding of banks affected by foreign monetary policy
May affect lending activity
Should mainly affect banks exposed to wholesale funding markets
Portfolio rebalancing Channel
Asset side rebalancing given foreign monetary policy
May affect lending activity
Country bank cross-border liabilities (% TA)
MP= shadow rate
Exposures to foreign country (% TA)
MP= CB balance sheet

4. Results
Bank lending channel is significant for French banks regarding their lending activity to resident in USD:
Coeficient is significant and negative
Positive shock in interest rates -> contraction in lending supply (USD loans)
For Italian bank: broad (?) impact of US MP on IT lending.
[Bank lending channel] : UK MP tightenning have very disperse sometimes significant influence (>0 and <0)
[Portfolio rebalancing] : results not clear

5. Some remarks on the bank lending channel (1)
Not easy to understand which banking flows are concerned in « locational statistics »
Corporate FR
France US
Subsi-
diaries
Bank FR
Bank FR
Branch Bank FR
Corporate US

6. Some remarks (1) What is a « resident »?
Are these loans to « debtors » resident in France in eur/ foreign currencies?
Do we consider a US NFC taking loans from a FR branch in US as resident lending? How does consolidation treat these flows?
Exclusion of cross-border lending is not enough to identify what is a resident from the lender point of view

7. Some remarks (2) What type of »risk »?
Example: the loans provided by BNP in USD to Total SA to invest in the US?
Is that resident lending? Or exposure to US?
Could be great to clarify exactly if we are on « ultimate risk basis » or « counterparty risk basis  »
What do you mesure?
the real effect of MP or the indirect impact of FX movements?
Has an FX movement independant of MP the same impact?
The impact of global factors?

8. Exposures in UR basis
French banking sector’s international claims to top 10 debtor countries – Country & counterparty sector breakdown (incl. off balance sheet claims)
Financial institutions
Non financial companies
Official sector
Off balance sheet claims
Total international exposures (EUR billion)
Share of total international exposures (%)
International claims in % of total French banking assets US
647
21,5%
9,0% IT
314
10,4%
4,4% GB
244
8,1%
3,4% BE
199
6,6%
2,8% DE
190
6,3%
2,6% JP
160
5,3%
2,2% ES
117
3,9%
1,6% NL
113
3,8% LU
109
3,6%
1,5% CH 76
2,5%
1,1%
>> Could be of interest to consider number as % of international exposure

9. Remark (2) dynamics vs. balance sheet allocation
More than the variation in credit itself, should we be more interested in the bank asset-side geographic dispersion of exposures?
If « outside » [US] monetary policy affects asset side geographic allocation: it may be more powerful to look at the fraction of US denominated loan/foreign exposures
The same applies to liability side of the bank balance sheet: how evolve the fraction of USD liabilities as a fraction of foreign liabilities?

10. Bank cross-border liabilities in US (% TA)
Remark (2) dynamics vs. balance sheet allocation
Bank cross-border liabilities in US (% TA)
Bank cross border liability exposures in US (% Bank cross-border liabilities)
If this is USD lending…
Especially to control the negative trend in foreign funding (as %TA ) related to GSiB regulation (that tends to des-incitive Wholesale or FX funding)
… also associated with EA crisis

11. Many events different from MP…
EA crisis?
Any control?

12. French banks are global
Chart 1. Share of total assets accounted for by banks identified as G-SII or O-SII (consolidated banking assets)
In % of total assets

13. Remarks (3) what policy implications?
Is this important? Should we care about the effects of US MP on lending in USD for FR/IT banks?
Is this influencing the Financial cycle of FR/IT?
Is this influencing bank BS allocation? Bank refinancing capacity?
Is this hampering the financing of NFS in FR/IT?
Does this weaken ECB independent Monetary Policy?
Can you disentangle supply and demand effects in credit?
Supply effect here more than demand (bank constraints)
But demand effects were important in the last years.

14. Remarks (4) individual banks are not BM comparable
Bank A
Bank B
Bank C
Bank D
Bank E
Individual banks have dispersed strategies in sector/ country allocation
How to disentangle the « de facto » differences in sensitivity given BS composition
Especially for the « portfolio channel ». Is the sole « foreign exposure » a good proxy for this? Could we disagregate? [Partially done for IT results]

15. Thank you for your attention