Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?
Ralph De Haas
European Bank for Reconstruction and Development
Iman Van Lelyveld
Bank for International Settlements (BIS) - Monetary and Economic Department; De Nederlandsche Bank
December 17, 2012
Journal of Money, Credit, and Banking, Forthcoming
We use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the Great Recession with lending by a benchmark of 202 domestic banks. Contrary to earlier and more contained crises, parent banks were not a significant source of strength to their subsidiaries during 2008-09. When controlling for other bank characteristics, multinational bank subsidiaries had to slow down credit growth almost three times as fast as domestic banks. This was in particular the case for subsidiaries of banking groups that relied more on wholesale funding. We conclude that while multinational banks may contribute to financial stability during local crisis episodes, they also increase the risk of ‘importing’ instability from abroad.
Number of Pages in PDF File: 40
Keywords: multinational banks, financial stability, crisis transmission, funding structure
JEL Classification: F15, F23, F36, G21Accepted Paper Series
Date posted: November 24, 2011 ; Last revised: December 17, 2012
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