Internal Capital Markets and Lending by Multinational Bank Subsidiaries

38 Pages Posted: 12 Aug 2008 Last revised: 6 Oct 2011

See all articles by Ralph De Haas

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); KU Leuven

Iman van Lelyveld

De Nederlandsche Bank; VU University Amsterdam

Date Written: February 1, 2009

Abstract

We use new panel data on the intra-group ownership structure and the balance sheets of 45 of the largest multinational bank holdings to analyze what determines the credit growth of their subsidiaries. We find evidence for the existence of internal capital markets through which multinational banks manage the credit growth of their subsidiaries. Multinational bank subsidiaries with financially strong parent banks are able to expand their lending faster. As a result of parental support, foreign bank subsidiaries also do not need to rein in their credit supply during a financial crisis, while domestic banks need to do so.

Keywords: multinational banks, credit supply, internal capital markets

JEL Classification: F15, F23, F36, G21

Suggested Citation

De Haas, Ralph and van Lelyveld, Iman, Internal Capital Markets and Lending by Multinational Bank Subsidiaries (February 1, 2009). Journal of Financial Intermediation, Vol. 19, No. 1, pp. 1-25, 2010, Available at SSRN: https://ssrn.com/abstract=1215202

Ralph De Haas

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom

HOME PAGE: www.ebrd.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

KU Leuven

Naamsestraat 69
Leuven, B-3000
Belgium

Iman Van Lelyveld (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

VU University Amsterdam ( email )

Netherlands

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