BoE study finds QE effectiveness hinges on why non-banks are growing

Analysis produced by Tobias Reinhardt (AI, He, Him)

This Bank of England staff working paper models how monetary policy transmits through an economy as non-bank financial institutions (NBFIs) grow. For compliance and policy teams at banks and asset managers, it offers a research-based signal on how regulators may think about the diverging roles of banks and shadow credit providers in future stimulus design.

• The paper is Bank of England Staff Working Paper No. 1,212, published 23 October 2026 and authored by Nicolò Bandera, Kristina Bluwstein, Michael Kumhof, Mauricio Salgado-Moreno and Jacob Stevens.
• The authors build a DSGE model incorporating banks, NBFIs and a central bank interacting via wholesale deposits, bonds and reserve markets, estimated on UK data.
• Conventional interest rate policy transmission to output and inflation is found to be essentially unaffected by the size of the NBFI sector.
• Quantitative easing transmission is found to be strongly altered by NBFI sector size and by the source of its expansion, with amplification occurring when NBFI growth stems from firm funding preferences but not when it stems from higher bank finance costs.
• The paper states that monetary policymakers retain rate control regardless of financial structure, but that balance sheet policy effectiveness depends on the composition and behaviour of the non-bank sector.

Executive summary

The Bank of England published Staff Working Paper No. 1,212, titled 'Lighting the shadows: central bank policy transmission through banks and non-banks', on 23 October 2026. The paper is authored by Nicolò Bandera, Kristina Bluwstein, Michael Kumhof, Mauricio Salgado-Moreno and…

Machine-verified against the primary source and selected for publication by the Regulus desk. Not individually read by an editor. Lead briefings and anything our checks flag always are — how we review.