Quantitative Easing and Bank Lending: A Panel Data Approach

Abstract

Studies of the Bank of England’s quantitative easing (QE) policy have tended to focus on its impact on financial markets and the broader macroeconomy. Less attention has been given to the effect on banks’ balance sheets and bank lending. In this paper we use a new non-publicly available panel data set of UK banks to address this question. Based on the historical bank-level relationship between deposits and bank lending, our analysis suggests that the first round of the Bank’s QE purchases during 2009-10 may have led to a small but statistically significant increase in bank lending growth. These effects appear more important for small rather than large banks. Our evidence also suggests that QE had weaker effects on lending because of low levels of bank capital.