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Transmission of Bank Liquidity Shocks in Loan and Deposit Markets: The Role of Interbank Borrowing and Market Monitoring
Franklin Allen
University of Pennsylvania - Finance Department; European Corporate Governance Institute (ECGI)
Aneta Hryckiewicz
Goethe University of Frankfurt; Kozminski University
Oskar Kowalewski
Warsaw School of Economics - World Economy Research Institute; Kozminski University; European University Viadrina Frankfurt (Oder)
Gunseli Tumer-Alkan
VU University Amsterdam - Faculty of Economics and Business Administration
January 12, 2012
Wharton Financial Institutions Center Working Paper 10-28
Fifth Singapore International Conference on Finance 2011
Abstract:
We examine the international transmission of liquidity and capital shocks from multinational bank-holding companies to their subsidiaries. Our findings are consistent with the studies that document the negative impact of parent bank fragility on subsidiaries’ lending. We further find that foreign bank lending is determined by different factors in developing economies and in developed countries. Moreover, the reduction in lending is stronger for those subsidiaries that are dependent on the interbank market. Finally, we find that market discipline plays a less important role in developing economies during the recent crisis. Instead, liquidity needs determine the change in deposits.
Number of Pages in PDF File: 33
Keywords: Foreign Banks, Credit Supply, Market Discipline
JEL Classification: F15, F34, G21
working papers series
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Date posted: November 14, 2010
; Last revised: April 5, 2012
Suggested CitationAllen, Franklin, Hryckiewicz, Aneta, Kowalewski, Oskar and Tumer-Alkan, Gunseli, Transmission of Bank Liquidity Shocks in Loan and Deposit Markets: The Role of Interbank Borrowing and Market Monitoring (January 12, 2012). Wharton Financial Institutions Center Working Paper 10-28; Fifth Singapore International Conference on Finance 2011 . Available at SSRN: http://ssrn.com/abstract=1707591 or http://dx.doi.org/10.2139/ssrn.1707591
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