Financial Crises and the Composition of Cross-Border Lending

60 Pages Posted: 2 Jun 2015

See all articles by Eugenio Cerutti

Eugenio Cerutti

International Monetary Fund (IMF); Johns Hopkins University

Galina Hale

Federal Reserve Bank of San Francisco

Camelia Minoiu

Federal Reserve Board

Date Written: October 2014

Abstract

We examine the composition and drivers of cross-border bank lending between 1995 and 2012, distinguishing between syndicated and non-syndicated loans. We show that on-balance sheet syndicated loan exposures account for almost one third of total cross-border loan exposures during this period. Furthermore, syndicated loan exposures increased during the global financial crisis due to large drawdowns on credit lines extended before the crisis. Our empirical analysis of the drivers of cross-border loan exposures in a large bilateral dataset shows three main results. First, banks with lower levels of capital favor syndicated over other kinds of cross-border loans. Second, borrower country characteristics such as level of development, economic size, and capital account openness, are less important in driving syndicated than non-syndicated loan activity, suggesting a diversification motive for syndication. Third, information asymmetries between lender and borrower countries, which are important both in normal and crisis times, became more binding for both types of cross-border lending activity during the recent crisis.

Keywords: Financial crises, Cross-border banking, Loans, Regression analysis, syndicated loans, global financial crisis, BIS international banking statistics, Dealogic Loan Analytics, bank assets, bank capital, banking system, return on assets, banking systems, banking sector, banking crises

JEL Classification: F30, F65, G15

Suggested Citation

Cerutti, Eugenio and Hale, Galina and Minoiu, Camelia, Financial Crises and the Composition of Cross-Border Lending (October 2014). IMF Working Paper No. 14/185. Available at SSRN: https://ssrn.com/abstract=2613297

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

Galina Hale

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3131 (Phone)
415-974-2168 (Fax)

HOME PAGE: http://www.frbsf.org/economic-research/economists/galina-hale/

Camelia Minoiu

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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