Shock Transmission Through International Banks – Evidence from France

29 Pages Posted: 14 Jun 2014

See all articles by Matthieu Bussière

Matthieu Bussière

Banque de France

Boubacar Camara

French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR)

François-Daniel Castellani

Banque de France - Autorité de contrôle Prudentiel

Vincent Potier

Banque de France

Julia Schmidt

Banque de France

Date Written: June 2014

Abstract

As part of the International Banking Research Network, the Banque de France contribution to the research project on liquidity risk transmission concentrates on the “outward” transmission of shocks affecting French banking groups. Using a rich dataset on their international positions, we analyze which balance sheet vulnerabilities contribute to the international transmission of aggregate liquidity risk shocks. The geographical breakdown of lending allows us to control for demand effects and to concentrate on the external adjustments to shocks affecting the supply of loans. We find that a higher capital ratio is associated with higher growth of lending abroad when aggregate liquidity conditions deteriorate. We find that our results are mainly driven by cross-border lending to the financial sector whereas local lending by foreign affiliates is hardly affected by the balance sheet shocks that the overall banking group is experiencing. We also investigate to what extent the identified effects differ depending on whether banks accessed public liquidity during the crisis and find that our baseline results are sensitive to the inclusion of central bank liquidity assistance.

Keywords: International banking, liquidity risk, shock transmission

JEL Classification: D24, F36, G21

Suggested Citation

Bussiere, Matthieu and Camara, Boubacar and Castellani, François-Daniel and Potier, Vincent and Schmidt, Julia, Shock Transmission Through International Banks – Evidence from France (June 2014). Available at SSRN: https://ssrn.com/abstract=2450079 or http://dx.doi.org/10.2139/ssrn.2450079

Matthieu Bussiere (Contact Author)

Banque de France ( email )

Paris
France

Boubacar Camara

French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR) ( email )

Paris
France

François-Daniel Castellani

Banque de France - Autorité de contrôle Prudentiel ( email )

61, rue Taitbout
Paris, 75436
France

Vincent Potier

Banque de France ( email )

Paris
France

Julia Schmidt

Banque de France ( email )

Paris
France

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