The Great Cross Border Bank Deleveraging
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| Author | : Mr.Eugenio Cerutti |
| Publisher | : International Monetary Fund |
| Total Pages | : 38 |
| Release | : 2014-09-25 |
| Genre | : Business & Economics |
| ISBN | : 1498332625 |
Download The Great Cross-Border Bank Deleveraging Book in PDF, Epub and Kindle
International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.
| Author | : Mr.Eugenio Cerutti |
| Publisher | : International Monetary Fund |
| Total Pages | : 38 |
| Release | : 2014-09-25 |
| Genre | : Business & Economics |
| ISBN | : 1498354785 |
Download The Great Cross-Border Bank Deleveraging Book in PDF, Epub and Kindle
International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.
| Author | : Mr.Shekhar Aiyar |
| Publisher | : International Monetary Fund |
| Total Pages | : 15 |
| Release | : 2012-10-26 |
| Genre | : Business & Economics |
| ISBN | : 1475580916 |
Download The Domestic Credit Supply Response to International Bank Deleveraging Book in PDF, Epub and Kindle
During the global financial crisis, European banks contracted foreign claims on recipient economies sharply. This paper examines the impact of that deleveraging on credit supply in recipient economies, with a particular focus on Asia. Identification is achieved by exploiting heterogeneity in ex-ante patterns of funding reliance on different European banking systems, and in variation in the ratio of local claims in local currency to total foreign claims in recipient economies. These sources of variation are used to create instruments for the deleveraging shock. We find that the contraction in European bank foreign claims was associated with a substantial reduction in domestic credit supply in a broad sample of countries. However, the credit supply response in Asia was only about half the size of the response in non-Asian countries, possibly due to a more robust policy response and healthier local bank balance sheets at the outset of the crisis.
| Author | : Alicia García-Herrero |
| Publisher | : |
| Total Pages | : 25 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
Download Deleveraging from Emerging Markets Book in PDF, Epub and Kindle
This paper shows stylized facts on the rather large retrenchment of cross-border lending by Euro-area banks into emerging markets. The clearest case is Asia where Euro-area banks have massively lost market share. The reason, however, is not only related to their retrenching but also to the surge in lending from others banks, especially from Emerging Asia. As a second step, we investigate empirically the determinants of cross-border bank flows with a gravity model and differentiate across Euro-area, US and Asian banks. We find a number of home factors behind the retrenchment in lending. Two are common to all home countries analyzed, namely global risk aversion and trade which, respectively, discourage and foster banks' overseas lending. Other factors, however, are specific of Euro-area banks, such as the higher cost of funding which is found to discourage lending while poor economic growth tends to foster it. The latter result would indicate that economic weakness of the last few years may have actually cushioned Euro-area banks' deleveraging from emerging markets. All in all, Euro-area banks' cross border lending appear to be more dependent on their cycle (both in terms of growth and external cost of funding) when compared with US and Asian banks.
| Author | : Mr.Thierry Tressel |
| Publisher | : International Monetary Fund |
| Total Pages | : 39 |
| Release | : 2010-10-01 |
| Genre | : Business & Economics |
| ISBN | : 1455209368 |
Download Financial Contagion Through Bank Deleveraging Book in PDF, Epub and Kindle
The financial crisis has highlighted the importance of various channels of financial contagion across countries. This paper first presents stylized facts of international banking activities during the crisis. It then describes a simple model of financial contagion based on bank balance sheet identities and behavioral assumptions of deleveraging. Cascade effects can be triggered by bank losses or contractions of interbank lending activities. As a result of shocks on assets or on liabilities of banks, a global deleveraging of international banking activities can occur. Simple simulations are presented to illustrate the use of the model and the relative importance of contagion channels, relying on bank losses of advanced countries’ banking systems during the financial crisis to calibrate the shock. The outcome of the simulations is compared with the deleveraging observed during the crisis suggesting that leverage is a major determinant of financial contagion.
| Author | : Mr.Eugenio Cerutti |
| Publisher | : International Monetary Fund |
| Total Pages | : 33 |
| Release | : 2014-04-29 |
| Genre | : Business & Economics |
| ISBN | : 148436211X |
Download Global Liquidity and Drivers of Cross-Border Bank Flows Book in PDF, Epub and Kindle
This paper provides a definition of global liquidity consistent with its meaning as the “ease of financing” in international financial markets. Using a longer time series and broader sample of countries than in previous studies, it identifies global factors driving cross-border bank flows, alongside country-specific factors. It confirms the explanatory power of US financial conditions, with flows decreasing in market volatility (VIX) and term premia, and increasing in bank leverage, growth in domestic credit and M2. A new finding is that similar variables for other systemic countries – the UK and the Euro Area – are also important, sometimes even more so, consistent with the dominant role of European banks in cross-border banking. Furthermore, recipient country characteristics are found to affect not only the level of country-specific flows, but also the cyclical impact of global liquidity, with sensitivities of flows to banks decreasing with stronger macroeconomic frameworks and better bank regulation, but less so for flows to non-financial firms.
| Author | : |
| Publisher | : World Bank Publications |
| Total Pages | : 25 |
| Release | : |
| Genre | : |
| ISBN | : |
Download Competetive Implications of Cross-Border Banking Book in PDF, Epub and Kindle
| Author | : Mr.Eugenio M Cerutti |
| Publisher | : International Monetary Fund |
| Total Pages | : 46 |
| Release | : 2018-09-28 |
| Genre | : Business & Economics |
| ISBN | : 1484378326 |
Download Cross-border Banking and the Circumvention of Macroprudential and Capital Control Measures Book in PDF, Epub and Kindle
We analyze the joint impact of macroprudential and capital control measures on cross-border banking flows, while controlling for multidimensional aspects in lender-and-borrower-relationships (e.g., distance, cultural proximity, microprudential regulations). We uncover interesting spillover effects from both types of measures when applied either by lender or borrowing countries, with many of them most likely associated with circumvention or arbitrage incentives. While lender countries’ macroprudential policies reduce direct cross-border banking outflows, they are associated with larger outflows through local affiliates. Direct cross-border inflows are higher in borrower countries with more usage of macroprudential policies, and are linked to circumvention motives. In the case of capital controls, most spillovers seem to be present through local affiliates. We do not find evidence to support the idea that additional capital inflow controls could interact with macro-prudential policies to mitigate cross-border spillovers.
| Author | : Mr.Eugenio Cerutti |
| Publisher | : International Monetary Fund |
| Total Pages | : 33 |
| Release | : 2014-04-29 |
| Genre | : Business & Economics |
| ISBN | : 1475517726 |
Download Global Liquidity and Drivers of Cross-Border Bank Flows Book in PDF, Epub and Kindle
This paper provides a definition of global liquidity consistent with its meaning as the “ease of financing” in international financial markets. Using a longer time series and broader sample of countries than in previous studies, it identifies global factors driving cross-border bank flows, alongside country-specific factors. It confirms the explanatory power of US financial conditions, with flows decreasing in market volatility (VIX) and term premia, and increasing in bank leverage, growth in domestic credit and M2. A new finding is that similar variables for other systemic countries – the UK and the Euro Area – are also important, sometimes even more so, consistent with the dominant role of European banks in cross-border banking. Furthermore, recipient country characteristics are found to affect not only the level of country-specific flows, but also the cyclical impact of global liquidity, with sensitivities of flows to banks decreasing with stronger macroeconomic frameworks and better bank regulation, but less so for flows to non-financial firms.
| Author | : Sangyup Choi |
| Publisher | : International Monetary Fund |
| Total Pages | : 60 |
| Release | : 2019-07-12 |
| Genre | : Business & Economics |
| ISBN | : 1484389697 |
Download International Fiscal-financial Spillovers: The Effect of Fiscal Shocks on Cross-border Bank Lending Book in PDF, Epub and Kindle
This paper sheds new light on the degree of international fiscal-financial spillovers by investigating the effect of domestic fiscal policies on cross-border bank lending. By estimating the dynamic response of U.S. cross-border bank lending towards the 45 recipient countries to exogenous domestic fiscal shocks (both measured by spending and revenue) between 1990Q1 and 2012Q4, we find that expansionary domestic fiscal shocks lead to a statistically significant increase in cross-border bank lending. The magnitude of the effect is also economically significant: the effect of 1 percent of GDP increase (decrease) in spending (revenue) is comparable to an exogenous decline in the federal funds rate. We also find that fiscal shocks tend to have larger effects during periods of recessions than expansions in the source country, and that the adverse effect of a fiscal consolidation is larger than the positive effect of the same size of a fiscal expansion. In contrast, we do not find systematic and statistically significant differences in the spillover effects across recipient countries depending on their exchange rate regime, although capital controls seem to play some moderating role. The extension of the analysis to a panel of 16 small open economies confirms the finding from the U.S. economy.
