International Banking and Liquidity Risk Transmission: Lessons from Across Countries

39 Pages Posted: 21 Jun 2016

See all articles by Claudia M. Buch

Claudia M. Buch

Deutsche Bundesbank

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: 2014

Abstract

Activities of international banks have been at the core of discussions on the causes and effects of the international financial crisis. Yet, we know little about the actual magnitudes and mechanisms for transmission of liquidity shocks through international banks, including the reasons for heterogeneity in transmission across banks. The International Banking Research Network (IBRN), established in 2012, brings together researchers from around the world with access to micro-data on individual banks to analyze issues pertaining to global banks. This paper summarizes the common methodology and results of empirical studies conducted in 11 countries to explore liquidity risk transmission. Among the main results is, first, that explanatory power of the empirical model is higher for domestic lending than for international lending. Second, how liquidity risk affects bank lending depends on the whether the banks are drawing on official sector liquidity facilities. Third, liquidity management across global banks can be important for liquidity risk transmission into lending. Fourth, there is substantial heterogeneity in the balance sheet characteristics that affect banks' responses to liquidity risk. Overall, bank balance sheet characteristics matter for differentiating lending responses across banks mainly in the realm of cross-border lending.

Keywords: International banking, liquidity, transmission, central bank liquidity, uncertainty, regulation, crises

JEL Classification: G01, F34, G21

Suggested Citation

Buch, Claudia M. and Goldberg, Linda S., International Banking and Liquidity Risk Transmission: Lessons from Across Countries (2014). Bundesbank Discussion Paper No. 17/2014. Available at SSRN: https://ssrn.com/abstract=2796995

Claudia M. Buch (Contact Author)

Deutsche Bundesbank ( email )

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

Linda S. Goldberg

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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