Quantitative Easing, Safe Asset Scarcity and Bank Lending

The Eurosystem's Public Sector Purchase Programme (PSPP) increased the scarcity of safe assets, which caused significant declines and substantial dispersion in European repo rates. However, banks holding these assets benefited from this development: First, using German security register, paper shows that affects bank funding costs, as their collateral supply is determined by ex ante securities holdings Second, it makes use credit register to show asset had real effects: Banks more exposed supply.