Federal Reserve Bank of New York · Oct 16, 2025
Jankauskas, Albertazzi, Burlon and Pavanini on ECB lending in Liberty Street Economics
Markdown · JSON · Original source
Published October 16, 2025, Tomas Jankauskas, Ugo Albertazzi, Lorenzo Burlon and Nicola Pavanini argue that European Central Bank (ECB) lending to banks at lower rates reduced financial fragility and improved overall welfare in the euro area. They use a structural model to compare actual outcomes with scenarios that did not occur, addressing a problem with direct comparisons: central banks often lend when economic conditions are worsening, and expectations of intervention may themselves avert bank runs. In the authors’ simulations, a 1 percentage point increase in banks’ borrowing rate raised default probability by an average of 1.8 percentage points. They say lower lending rates also reduced expected deposit insurance costs and household and business lending rates. But lower rates passed through to deposit rates, so depositors bore most of the negative effects; the authors report a positive overall welfare gain alongside this trade-off. Their conclusion is that the policies were particularly effective in reducing the risk of unwarranted and self-fulfilling runs. These findings come from model simulations, not a direct comparison of otherwise identical real-world episodes. The post does not provide a basis for assessing how well the model’s alternative scenarios predict outcomes outside its analysis.
Headline and summary by Escape Meridian, prepared by Luna from the attributed source. A source check is not independent confirmation of the source’s claims.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Oct 16, 2025 (2025-10-16T11:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-11T17:08:23.892Z. First observed: 2026-10-30T19:58:34.523Z. Retrieved: 2026-10-30T21:12:03.990Z.
Referenced by
Recorded citations and public file attachments. A reference alone does not establish agreement or influence.
No public references recorded here yet.
Limits
Text as retrieved on October 30, 2026; originally published October 16, 2025. The findings rely on model simulations; the post describes the difficulty of identifying comparable episodes in which central banks did not intervene and bank runs occurred. The post describes a sample of banks covering roughly half of overall euro-area loan and deposit volumes; its results should be understood in light of that sample.
Open question
How closely do the model’s alternative scenarios reflect bank-run risks that would have occurred without ECB lending?
Source-stated
The authors say the model identifies alternative scenarios, including possible bank runs, to address difficulties in assessing central bank lending using direct comparisons.
The structure of the model enables the identification of all alternative scenarios, including runs, that could have materialized
Source-stated
In the authors’ model simulations, raising the central bank borrowing rate increased banks’ default probability on average.
a 1 percentage point increase in the rate at which banks borrow from the central bank increases banks’ default probability by, on average, 1.8 percentage points.
Source-stated
The authors say lower lending rates improved overall welfare, while lower deposit rates meant depositors bore most of the negative effects.
While the overall welfare gain was positive, the multifaceted nature of monetary policy highlights the trade-offs policymakers face.
Source-stated
The authors conclude that ECB lending policies were particularly effective in reducing the risk of unwarranted and self-fulfilling bank runs.
The model simulations show that these policies were particularly effective in reducing the risk of unwarranted and self-fulfilling runs and improving overall welfare.
Source-stated
The post is dated October 16, 2025.
October 16, 2025 The Shadow Value of Central Bank Lending
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: 208f3d77-377f-c30b-4db5-9cd4ac106127.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: passed by anthropic/claude-opus-5.5 on 2026-11-11T17:04:17.234Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: d751a7c1405789e6e8c648addcc148c69c18a28ca412fc3c5bd6a3a7a09dbc6c. Source text hash: f33493e5403d06a01d68e398106491a4f3111e6ee18ad4102dc1cda123a0988d.
Revision and source-check history
Version 1 · 2026-11-11T17:08:23.892Z
Jankauskas, Albertazzi, Burlon and Pavanini on ECB lending in Liberty Street Economics
Published October 16, 2025, Tomas Jankauskas, Ugo Albertazzi, Lorenzo Burlon and Nicola Pavanini argue that European Central Bank (ECB) lending to banks at lower rates reduced financial fragility and improved overall welfare in the euro area. They use a structural model to compare actual outcomes with scenarios that did not occur, addressing a problem with direct comparisons: central banks often lend when economic conditions are worsening, and expectations of intervention may themselves avert bank runs. In the authors’ simulations, a 1 percentage point increase in banks’ borrowing rate raised default probability by an average of 1.8 percentage points. They say lower lending rates also reduced expected deposit insurance costs and household and business lending rates. But lower rates passed through to deposit rates, so depositors bore most of the negative effects; the authors report a positive overall welfare gain alongside this trade-off. Their conclusion is that the policies were particularly effective in reducing the risk of unwarranted and self-fulfilling runs. These findings come from model simulations, not a direct comparison of otherwise identical real-world episodes. The post does not provide a basis for assessing how well the model’s alternative scenarios predict outcomes outside its analysis.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Oct 16, 2025 (2025-10-16T11:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-11T17:08:23.892Z. First observed: 2026-10-30T19:58:34.523Z. Retrieved: 2026-10-30T21:12:03.990Z.
Limits
Text as retrieved on October 30, 2026; originally published October 16, 2025. The findings rely on model simulations; the post describes the difficulty of identifying comparable episodes in which central banks did not intervene and bank runs occurred. The post describes a sample of banks covering roughly half of overall euro-area loan and deposit volumes; its results should be understood in light of that sample.
Open question
How closely do the model’s alternative scenarios reflect bank-run risks that would have occurred without ECB lending?
Source-stated
The authors say the model identifies alternative scenarios, including possible bank runs, to address difficulties in assessing central bank lending using direct comparisons.
The structure of the model enables the identification of all alternative scenarios, including runs, that could have materialized
Source-stated
In the authors’ model simulations, raising the central bank borrowing rate increased banks’ default probability on average.
a 1 percentage point increase in the rate at which banks borrow from the central bank increases banks’ default probability by, on average, 1.8 percentage points.
Source-stated
The authors say lower lending rates improved overall welfare, while lower deposit rates meant depositors bore most of the negative effects.
While the overall welfare gain was positive, the multifaceted nature of monetary policy highlights the trade-offs policymakers face.
Source-stated
The authors conclude that ECB lending policies were particularly effective in reducing the risk of unwarranted and self-fulfilling bank runs.
The model simulations show that these policies were particularly effective in reducing the risk of unwarranted and self-fulfilling runs and improving overall welfare.
Source-stated
The post is dated October 16, 2025.
October 16, 2025 The Shadow Value of Central Bank Lending
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: 208f3d77-377f-c30b-4db5-9cd4ac106127.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: passed by anthropic/claude-opus-5.5 on 2026-11-11T17:04:17.234Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: d751a7c1405789e6e8c648addcc148c69c18a28ca412fc3c5bd6a3a7a09dbc6c. Source text hash: f33493e5403d06a01d68e398106491a4f3111e6ee18ad4102dc1cda123a0988d.
passed · 2026-11-11T17:04:17.234Z · anthropic/claude-opus-5.5
Publication: 208f3d77-377f-c30b-4db5-9cd4ac106127
attribution — pass: The reading correctly attributes the post and its findings to Tomas Jankauskas, Ugo Albertazzi, Lorenzo Burlon and Nicola Pavanini in Liberty Street Economics, published by the New York Fed. The text is a single argued post, not a listing. Findings are consistently framed as the authors' claims and model results.
Tomas Jankauskas, Ugo Albertazzi, Lorenzo Burlon, and Nicola Pavanini
summary — pass: The summary leads with the authors' argument and explains the counterfactual approach in plain terms: the model compares actual outcomes with scenarios that did not occur. It also explains why direct comparisons are hard. It keeps the 1.8-point estimate, the welfare gain and the trade-off for depositors, and states that the results come from a model. Terms such as bank run and default probability are understandable in context. The title and question are faithful.
most of the negative effects are borne by depositors
date — pass: The reading's date of October 16, 2025 matches the post's dateline and the UTC calendar day of originalPublished. The page is a publisher page, not an archive copy. The reading presents no later events and no forecasts as outcomes. The 'You may also be interested in' links are not used.
October 16, 2025 The Shadow Value of Central Bank Lending
support — pass: Each claim matches the source text: - the 1.8 percentage point effect; - lower deposit insurance costs and lending rates for households and firms; - depositors bearing most of the negative effects; - a positive overall welfare gain; - the conclusion about self-fulfilling runs; - the roughly 50 percent bank sample. The caveats about relying on the model are fair and do not overreach. The page shows a dateModified one day after publication, but no editedAfterPublication flag is set.
This effect was primarily driven by reduced bank risk, lower expected deposit insurance costs, and decreased lending rates for households and firms.
media — pass: No media is selected and no verified media candidates were supplied, so nothing was invented or misidentified.
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