Risks in U.S. Bank International Exposures

24 Pages Posted: 13 Mar 2006

See all articles by Nicola Cetorelli

Nicola Cetorelli

Federal Reserve Bank of New York

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Date Written: March 2006

Abstract

U.S. banks have substantial exposure to foreign markets such as Europe and Latin America. In this paper, we show how the amounts and forms of these exposures have evolved over time and note the changes in embodied risks taken through banks' cross-border activity, local claims, and derivative positions. Our findings vary with the type of U.S. bank. Compared with other banks, money-center banks tend to have a greater share of their assets in foreign exposures. Some of money-center banks' exposure to riskier countries, particularly Latin American countries, is achieved through the activities of local branches and subsidiaries that take on liabilities as well as assets, a strategy that reduces their bank transfer risk accordingly. As a share of total international exposures, the transfer risk assumed by money-center banks tends to be significantly lower than that of other banks.

Keywords: bank, foreign exposure, cross border, lending, capital

JEL Classification: F3, G2

Suggested Citation

Cetorelli, Nicola and Goldberg, Linda S., Risks in U.S. Bank International Exposures (March 2006). FRB of New York Staff Report No. 240. Available at SSRN: https://ssrn.com/abstract=890349 or http://dx.doi.org/10.2139/ssrn.890349

Nicola Cetorelli (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5071 (Phone)
212-720-8363 (Fax)

HOME PAGE: http://nyfedeconomists.org/cetorelli/

Linda S. Goldberg

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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