Banks' Foreign Credit Exposures and Borrowers' Rollover Risks Measurement, Evolution and Determinants

45 Pages Posted: 28 Feb 2013

See all articles by Eugenio Cerutti

Eugenio Cerutti

International Monetary Fund (IMF); Johns Hopkins University

Date Written: January 2013

Abstract

The recent crises highlighted the role of cross-border banking linkages. This paper proposes two new measures for better capturing creditor banking systems' foreign credit exposures and borrower countries' reliance on foreign bank credit, by combining BIS data with bank-level data. The results indicate that the proposed refinements matter, especially when foreign bank affiliates' funding relies heavily on local deposits. In addition, after developing novel and necessary break-in-series and exchange rate variation adjustments, estimations looking at the driving factors of both measures during 2006-2012 highlight: (i) the role of systemic banking crises and global financial conditions in the evolution of banks' foreign credit exposures; (ii) the role of a larger set of factors in the case of the evolution of borrower countries' reliance on foreign bank credit-how countries borrowed, from whom they borrowed, and global financial and domestic demand conditions.

Keywords: Bank credit, Banking systems, Borrowing, Credit risk, International banks, Systemic risks, banking system, contagion, international, vulnerabilities

JEL Classification: F21, F34, G15, G18, Y10

Suggested Citation

Cerutti, Eugenio, Banks' Foreign Credit Exposures and Borrowers' Rollover Risks Measurement, Evolution and Determinants (January 2013). IMF Working Paper No. 13/9, Available at SSRN: https://ssrn.com/abstract=2226282

Eugenio Cerutti (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Johns Hopkins University ( email )

Baltimore, MD 21218
United States

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