Transmission of Bank Liquidity Shocks in Loan and Deposit Markets: The Role of Interbank Borrowing and Market Monitoring

33 Pages Posted: 14 Nov 2010 Last revised: 7 Aug 2015

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Aneta Hryckiewicz

Economic Institute for Empirical Analysis, Kozminski University

Oskar Kowalewski

IESEG School of Management; LEM - CNRS 9221

Gunseli Tumer-Alkan

VU University Amsterdam; Vrije Universiteit Amsterdam, School of Business and Economics

Date Written: December 1, 2014

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.

Keywords: Foreign Banks, Credit Supply, Market Discipline

JEL Classification: F15, F34, G21

Suggested Citation

Allen, Franklin and Hryckiewicz, Aneta and Kowalewski, Oskar and Tumer-Alkan, Gunseli and Tumer-Alkan, Gunseli, Transmission of Bank Liquidity Shocks in Loan and Deposit Markets: The Role of Interbank Borrowing and Market Monitoring (December 1, 2014). Journal of Financial Stability, Vol. 15, 2014, Wharton Financial Institutions Center Working Paper 10-28, Fifth Singapore International Conference on Finance 2011 , Available at SSRN: https://ssrn.com/abstract=1707591 or http://dx.doi.org/10.2139/ssrn.1707591

Franklin Allen

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Aneta Hryckiewicz

Economic Institute for Empirical Analysis, Kozminski University ( email )

ul. Jagiellonska 57/59
Warsaw, 03-303
Poland
(22) 519 21 69 (Phone)

Oskar Kowalewski

IESEG School of Management ( email )

1 Parvis de La Défense
Socle de la Grande Arche
Paris La Défense cedex, 92044
France

HOME PAGE: http://www.ieseg.fr/en/faculty-and-research/professor/?id=1740

LEM - CNRS 9221 ( email )

Lille
France

HOME PAGE: http://lem.cnrs.fr/

Gunseli Tumer-Alkan (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5987430 (Phone)

HOME PAGE: http://https://personal.vu.nl/g.tumeralkan/

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
613
Abstract Views
4,973
Rank
91,266
PlumX Metrics