The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions
39 Pages Posted: 22 Oct 2014
Date Written: September 2014
International banks greatly reduced their direct cross-border and local affiliates' lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets' prior assessments of banks' vulnerabilities, with banks' financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates' lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.
Keywords: Cross-border banking, International banks, Loans, Credit, Supply and demand, Banking systems, Balance sheets, Financial statements, Global banks, Credit supply, Financial crisis, Deleveraging, International capital markets, systemic crisis, systemic_crisis, global financial crisis, return on assets, banking statistics, systemic risk, pre-crisis, banking crisis, systemic banking crisis, banking activities, home banking, bank capital, financial crises, banking crises, bank liquidity, banking network, recession, bank of international settlements, debt crisis, bank behavior, banking markets, banks loans, bank of international settlements (bis), bank subsidiaries, crisis episodes, domestic liquid
JEL Classification: E44, F23, F36, G21
Suggested Citation: Suggested Citation