Monetary Transmission through Bank Securities Portfolios


John Krainer

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2023-18 | July 1, 2023

We study the transmission of monetary policy through bank securities portfolios for the United States using granular supervisory data on bank securities, hedging positions, and corporate credit. We find that banks that experienced larger market value losses on their securities during the monetary tightening cycle in 2022 extended relatively less credit to firms. Such a spillover effect was stronger for (i) available-for sale securities, (ii) unhedged securities, (iii) low-capitalized banks, and (iv) banks that have to include unrealized gains and losses on their available-for-sale securities in their regulatory capital. Our findings provide evidence for a forceful transmission channel of monetary policy that is shaped by the regulatory framework of the banking system.

Article Citation

Krainer, John, and Pascal Paul. 2023. “Monetary Transmission through Bank Securities Portfolios,” Federal Reserve Bank of San Francisco Working Paper 2023-18. Available at

About the Author
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Pascal Paul is a senior economist in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Pascal Paul