For many small and medium-sized banks close relationships with their home territory are a source of stability, which has a beneficial effect on the local economy. However, a misguided interpretation of these relationships can distort the disbursement of credit, thereby jeopardizing the soundness of banks’ balance sheets and the efficient allocation of resources.
For money plays no essential or active role in the monetary transmission mechanism, it reacts only passively to price developments – which are influenced directly only by the monetary policy interest rate – without any feedback effects on the economy. So money does not matter.