HEC Research Papers Series,
HEC Paris

Abstract: We study a channel of quantitative easing (QE) that operates through the renegotiation of existing bank loans. Matching syndicated-loan amendment histories to bank balance sheets, we find that larger purchases of agency mortgage-backed securities (MBS) are associated with more renegotiation at exposed banks, with the increase concentrated in amendments that favor lenders. Relative to other loans of the same firm in the same quarter, a doubling of quarterly purchases is associated with committed amounts 2.5 percent lower, spreads 10.6 basis points higher, and maturities 3.1 percent shorter on exposed banks’ amendments. The response is present among borrowers in covenant compliance and no stronger among those in violation, distinguishing it from renegotiation driven by creditor control rights in technical default. It is concentrated among well-capitalized, well-provisioned, and profitable banks and among less profitable, lower-valuation, but not highly leveraged borrowers, consistent with a bargaining channel in which financially strong lenders extract larger concessions from borrowers with weaker outside options. A shift-share design indicates that a ten-percentage-point increase in lender-favorable renegotiation lowers firms’ annual investment rate by 6 percent of its mean. QE thus tightened existing corporate credit for borrowers of exposed banks, potentially offsetting part of its expansionary effects on new lending.

Keywords: Quantitative Easing; Bank Credit Supply; Loan Renegotiation; Corporate Investment

JEL-codes: E52; G21; G31; G32

46 pages, October 17, 2026

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