Financial Deglobalisation in Banking?

Journal of International Money and Finance, Vol. 94, June 2019 DOI/10.1016/j.jimonfin.2019.01.011

Posted: 9 Apr 2019

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: March 17, 2019

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 reporting banks provide a clearer picture of international financial integration than the traditional “residence”, or balance-of-payments, view. They show that what appears to be a global shrinkage of bank positions is actually driven by European banks. These banks uniquely responded to credit losses after 2007 by shedding assets abroad to restore capital ratios. Other banking systems’ global footprints, notably those of Japanese, Canadian and even US banks, have expanded since 2007. Using a global dataset of banks’ affiliates (branches and subsidiaries), we demonstrate that the who (i.e., bank nationality) accounts for more of the peak-to-trough shrinkage in foreign claims than does the where (i.e., locational factors). We relate bank nationality in turn to EU membership, which may reflect asset shrinkage required by the EU competition authorities in response to state aid, bank profitability and credit losses.

Keywords: Financial globalisation; International banking; Consolidation; Bank nationality; 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? (March 17, 2019). Journal of International Money and Finance, Vol. 94, June 2019 DOI/10.1016/j.jimonfin.2019.01.011. Available at SSRN: https://ssrn.com/abstract=3354039

Robert N. McCauley

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 (Contact Author)

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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