Freeze! Financial Sanctions and Bank Responses

51 Pages Posted: 7 Dec 2018 Last revised: 18 Nov 2021

See all articles by Matthias Efing

Matthias Efing

HEC Paris - Finance Department; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Stefan Goldbach

Technical University of Darmstadt

Volker Nitsch

Technical University of Darmstadt - Department of Law and Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: 2018

Abstract

We study the effects of financial sanctions on cross-border credit supply. Using a differences-in-differences approach to analyze eleven sanctions episodes between 2002 and 2015, we find that banks located in Germany reduce their positions in countries with sanctioned entities by 38%. The average German branch or subsidiary located outside Germany does not adjust its positions after the imposition of sanctions. For affiliated banks located in countries with low financial standards, we even observe a relative increase in credit supply. These effects are stronger if sanctions are only imposed by EU member states and not by the entire UN.

Keywords: financial sanctions, law and finance, cross-border lending, international banking

JEL Classification: F51, G18, G28, G38, K33

Suggested Citation

Efing, Matthias and Goldbach, Stefan and Nitsch, Volker, Freeze! Financial Sanctions and Bank Responses (2018). Deutsche Bundesbank Discussion Paper No. 45/2018, Available at SSRN: https://ssrn.com/abstract=3297404 or http://dx.doi.org/10.2139/ssrn.3297404

Matthias Efing (Contact Author)

HEC Paris - Finance Department ( email )

France
(++33)695646755 (Phone)

HOME PAGE: http://matthiasefing.com/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Stefan Goldbach

Technical University of Darmstadt ( email )

Marktplatz 15
Darmstadt, Hesse D-64289
Germany

Volker Nitsch

Technical University of Darmstadt - Department of Law and Economics ( email )

Marktplatz 15
Residenzschloss
Darmstadt, 64283
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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