The Role of External Balance Sheets in the Financial Crisis

23 Pages Posted: 5 Dec 2013

See all articles by Yaser Al-Saffar

Yaser Al-Saffar

Bank of England

Wolfgang Ridinger

Bank of England

Simon Whitaker

Bank of England - Monetary Analysis

Date Written: October 25, 2013

Abstract

Gross external balance sheets are important in explaining the incidence of the financial crisis across economies. Just as for banks, leverage of the national balance sheet was an indicator of subsequent vulnerability. Countries that also experienced strong domestic credit growth, in part fueled by ‘savings glut’ net capital inflows, suffered particularly badly. And banks’ balance sheets were critical in the transmission mechanism: high gross external interbank debt — the ‘banking glut’ — and maturity and currency mismatches, contributed to foreign rollover risk.

Suggested Citation

Al-Saffar, Yaser and Ridinger, Wolfgang and Whitaker, Simon, The Role of External Balance Sheets in the Financial Crisis (October 25, 2013). Bank of England Financial Stability Paper No. 24. Available at SSRN: https://ssrn.com/abstract=2363389

Yaser Al-Saffar

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Wolfgang Ridinger

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Simon Whitaker (Contact Author)

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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