Illiquid collateral boosts bank lending during European debt crisis.
Accepting illiquid assets as collateral at the central bank led to an increase in bank lending during the European Sovereign Debt Crisis. The study looked at 177 major banks in the Euro area from 2011 to 2014. Banks that used more illiquid collateral with the central bank increased their lending to businesses and households. For every increase in illiquid collateral, lending went up by 0.6%.