Financial Deglobalisation in Banking?

31 Pages Posted: 3 Jul 2017

See all articles by Robert N. McCauley

Robert N. McCauley

Bank for International Settlements (BIS)

Agustín S. Bénétrix

Trinity College (Dublin)

Patrick McGuire

Bank for International Settlements (BIS)

Goetz von Peter

Bank for International Settlements - Research and Policy Analysis

Multiple version iconThere are 2 versions of this paper

Date Written: June 2017

Abstract

This paper argues that the decline in cross-border banking since 2007 does not amount to a broad-based retreat in international lending ("financial deglobalisation"). We show that BIS international banking data organised by the nationality of ownership ("consolidated view") provide a clearer picture of international financial integration than the traditional balance-of-payments measure. On the consolidated view, what appears to be a global shrinkage of international banking is confined to European banks, which uniquely responded to credit losses after 2007 by shedding assets abroad - in particular, reducing lending - to restore capital ratios. Other banking systems' global footprint, notably those of Japanese, Canadian and even US banks, has expanded since 2007. Using a global dataset of banks' affiliates (branches and subsidiaries), we demonstrate that the who (nationality) accounts for more of the peak-to-trough shrinkage of foreign claims than does the where (locational factors). These findings suggest that the contraction in global lending can be interpreted as cyclical deleveraging of European banks' large overseas operations, rather than broad-based financial deglobalisation.

Keywords: Financial globalisation, international banking, consolidation, ownership

JEL Classification: F36, F4, G21

Suggested Citation

McCauley, Robert N. and Bénétrix, Agustín and McGuire, Patrick M. and von Peter, Goetz, Financial Deglobalisation in Banking? (June 2017). BIS Working Paper No. 650. Available at SSRN: https://ssrn.com/abstract=2996286

Robert N. McCauley (Contact Author)

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Agustín Bénétrix

Trinity College (Dublin) ( email )

2-3 College Green
Dublin, Leinster
Ireland

Patrick M. McGuire

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Goetz Von Peter

Bank for International Settlements - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
+ 41 61 280 8840 (Phone)

HOME PAGE: http://www.bis.org/author/goetz_von_peter.htm

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