Freeze! Financial Sanctions and Bank Responses

49 Pages Posted: 21 Feb 2019

See all articles by Matthias Efing

Matthias Efing

affiliation not provided to SSRN

Stefan Goldbach

Darmstadt University of Technology

Volker Nitsch

Darmstadt University of Technology - 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: F510, G180, G280, G380, K330

Suggested Citation

Efing, Matthias and Goldbach, Stefan and Nitsch, Volker, Freeze! Financial Sanctions and Bank Responses (2018). CESifo Working Paper No. 7424. Available at SSRN: https://ssrn.com/abstract=3338778

Matthias Efing (Contact Author)

affiliation not provided to SSRN

Stefan Goldbach

Darmstadt University of Technology ( email )

Marktplatz 15
Darmstadt, Hesse D-64289
Germany

Volker Nitsch

Darmstadt University of Technology - 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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