The Effect of Monetary Policy on Bank Wholesale Funding

We study how monetary policy affects the funding composition of banking sector. When tightening reduces supply retail deposits, banks attempt to substitute wholesale for deposit outflows smooth their lending. Because financial frictions, have varying degrees access funding. Therefore, large banks, or those with greater reliance on funding, increase more. Consequently, increases both and concentration within Our findings also suggest that liquidity requirements could bolster transmission through bank lending channel. This paper was accepted by Tyler Shumway, finance.