We find that central bank reserves injected by QE crowd out bank lending. We estimate a structural model with cross-sectional instrumental variables for deposit and loan demand. Our results are determined by the elasticity of loan demand and the impact of reserve holdings on the cost of supplying loans. We find that the reserves injected by QE raise loan rates by 15.6 bps, and each dollar of reserves reduces bank lending by 19 cents. Our results imply that a large injection of central bank reserves has the unintended consequence of crowding out bank loans because of bank balance sheet costs.