Crises, Rescues, and Policy Transmission Through International Banks

44 Pages Posted: 8 Jun 2016

See all articles by Claudia M. Buch

Claudia M. Buch

Deutsche Bundesbank

Cathérine Koch

Bank for International Settlements (BIS)

Michael Koetter

Halle Institute for Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: 2011

Abstract

The World Financial Crisis has shaken the fundamentals of international banking and triggered a downward spiral of asset prices. To prevent a further meltdown of markets, governments have intervened massively through rescues measures aimed at recapitalizing banks and through liquidity support. We use a detailed, banklevel dataset for German banks to analyze how the lending and borrowing of their foreign affiliates has responded to domestic (German) and to US crisis support schemes. We analyze how these policy interventions have spilled over into foreign markets. We identify loan supply shocks by exploiting that not all banks have received policy support and that the timing of receiving support measures has differed across banks. We find that banks covered by rescue measures of the German government have increased their foreign activities after these policy interventions, but they have not expanded relative to banks not receiving support. Banks claiming liquidity support under the Term Auction Facility (TAF) program have withdrawn from foreign markets outside the US, but they have expanded relative to affiliates of other German banks.

Keywords: Cross-border banking, financial crisis, government support, Term Auction Facility

JEL Classification: G01, F34, G21

Suggested Citation

Buch, Claudia M. and Koch, Catherine and Koetter, Michael, Crises, Rescues, and Policy Transmission Through International Banks (2011). Bundesbank Series 1 Discussion Paper No. 2011,15. Available at SSRN: https://ssrn.com/abstract=2785408

Claudia M. Buch (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Catherine Koch

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Michael Koetter

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

HOME PAGE: http://www.iwh-halle.de/en/about-the-iwh/people/detail/michael-koetter/

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