The Mix of International Banks' Foreign Claims: Determinants and Implications

44 Pages Posted: 10 Nov 2005

See all articles by Alicia García-Herrero

Alicia García-Herrero

Natixis ; BBVA Research; Bruegel

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Date Written: October 2005

Abstract

The authors analyze the determinants and implications for financial stability of the mix of international banks' claims countries receive. In particular, they distinguish between local claims, extended by international banks through their affiliates in a host (or claim recipient) country, and cross-border claims, booked from outside the host country, typically from banks' headquarters in their home countries. Using data on U.S., Spanish, and Italian banks' foreign claims across countries, the authors find that the share of local foreign claims is primarily driven by the degree of freedom in the host banking sector and by business opportunities in the local market. Entry requirements, startup and informational costs associated with international banking also play a role, but their influence is less robust. Finally, they find that the mix of international bank claims has implications for financial stability, since foreign claim volatility is lower in countries that receive a larger share of local claims.

Keywords: foreign bank financing, financial FDI, cross-border claims

JEL Classification: F36, F37, G21

Suggested Citation

Garcia-Herrero, Alicia and Martinez Peria, Maria Soledad, The Mix of International Banks' Foreign Claims: Determinants and Implications (October 2005). World Bank Policy Research Working Paper No. 3755. Available at SSRN: https://ssrn.com/abstract=844826

BBVA Research ( email )

C/ Azul,4. Edificio La Vela. Planta 4
Madrid, 28050
Spain

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium
Belgium

Maria Soledad Martinez Peria

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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