Internal Capital Markets and Lending by Multinational Bank Subsidiaries
38 Pages Posted: 12 Aug 2008 Last revised: 6 Oct 2011
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: Suggested Citation
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