283 
321The expected credit loss (ECL) model, a fundamental reform in loan loss provisioning after the 2008 financial crisis, replaces the Incurred Credit Loss (ICL) model with forward-looking risk assessment that incorporates macroeconomic forecasts. Whether and how this accounting change affects monetary policy transmission efficiency through the banking system remains unexplored.
This paper develops a partial equilibrium model of banks and theoretically decomposes three micro-channels through which the ECL affects monetary policy transmission: the forward-looking provisioning cost channel, the collateral value channel, and the risk appetite channel. Taking China’s phased implementation of the ECL in the banking sector from 2018 to 2021 as a quasi-natural experiment, this paper employs a staggered DID approach for causal identification. The results show that the ECL significantly strengthens monetary policy transmission efficiency: For every one percentage point increase in the required reserve ratio, ECL-adopting banks raise their loan interest rates by an additional 0.37 percentage points and reduce their loan share by an additional 0.57 percentage points, which represents increases of 55% and 39%, respectively, compared to non-ECL banks. Mechanism testing confirms that the forward-looking provisioning cost channel is the dominant mechanism, and its effectiveness depends on the adequacy and timeliness of provisioning. Meanwhile, the collateral value channel and the risk appetite channel also play synergistic roles. Heterogeneity analysis shows that this effect is more pronounced in banks with higher market concentration, effective internal governance, diversified customer structures, and greater regulatory pressure on provisioning.
This paper is the first to link the ECL reform with monetary policy transmission efficiency, revealing the micro-level reshaping mechanism through which accounting rule changes affect macroeconomic policy transmission, thereby filling a gap in the existing literature. Policy recommendations are as follows: Provisioning regulation should shift from “static compliance” to “forward-looking parameter guidance”; monetary policy should strengthen the structured communication of policy signals; macroprudential policy and monetary policy should achieve mechanism coordination; banks should enhance the linkage between internal risk models and macroeconomic information.
