I exploit the 1998 Russian default as a negative liquidity shock to international banks and analyze its transmission to Peru. I find that after the shock international banks reduce bank-to-bank ...lending to Peruvian banks and Peruvian banks reduce lending to Peruvian firms. The effect is strongest for domestically owned banks that borrow internationally, intermediate for foreign-owned banks, and weakest for locally funded banks. I control for credit demand by examining firms that borrow from several banks. These results suggest that international banks transmit liquidity shocks across countries and that negative liquidity shocks reduce bank lending in affected countries.
We study whether cross-country differences in regulations have affected international bank flows. We find strong evidence that banks have transferred funds to markets with fewer regulations. This ...form of regulatory arbitrage suggests there may be a destructive "race to the bottom" in global regulations, which restricts domestic regulators' ability to limit bank risk-taking. However, we also find that the links between regulation differences and bank flows are significantly stronger if the recipient country is a developed country with strong property rights and creditor rights. This suggests that, while differences in regulations have important influences, without a strong institutional environment, lax regulations are not enough to encourage massive capital flows.
► We use the CoVaR approach to identify the main factors behind systemic risk. ► We examine a set of large international banks. ► We find weaker evidence that either size or leverage contributes to ...systemic risk. ► Short-term wholesale funding emerges as the most relevant systemic factor. ► Asymmetries play an important role in the CoVaR approach.
We use the CoVaR approach to identify the main factors behind systemic risk in a set of large international banks. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find weaker evidence that either size or leverage contributes to systemic risk within the class of large international banks. We also show that asymmetries based on the sign of bank returns play an important role in capturing the sensitivity of system-wide risk to individual bank returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee’s proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
We use loan-level data to examine how large international banks reduced their cross-border lending after the collapse of Lehman Brothers. Country, firm, and bank fixed effects allow us to disentangle ...credit supply and demand and to simultaneously control for the unobserved traits of banks and the countries and firms they lend to. We document substantial heterogeneity in the extent to which different banks retrenched from the same country. Banks reduced credit less to markets that were geographically close; where they were more experienced; where they operated a subsidiary; and where they were integrated into a network of domestic co-lenders.
Legal and institutional differences shape the ownership and terms of bank loans across the world. We show that under strong creditor protection, loans have more concentrated ownership, longer ...maturities, and lower interest rates. Moreover, the impact of creditor rights on loans depends on borrower characteristics such as the size and tangibility of assets. Foreign banks appear especially sensitive to the legal and institutional environment, with their ownership declining relative to domestic banks as creditor protection falls. Our multidimensional empirical model paints a more complete picture of how financial contracts respond to the legal and institutional environment than existing studies.
Rescue packages and bank lending Brei, Michael; Gambacorta, Leonardo; von Peter, Goetz
Journal of banking & finance,
02/2013, Letnik:
37, Številka:
2
Journal Article
Recenzirano
Odprti dostop
► We analyse whether the rescue measures helped to sustain the supply of bank lending. ► We use information of more than 100 large banks headquartered in 14 OECD countries. ► We apply a setup that ...allows testing for structural shifts in the bank loan equation. ► Strong capitalisation generally supports loan growth in normal times. ► Recapitalisations sustain credit supply once bank balance sheets are sufficiently strengthened.
This paper examines whether the rescue measures adopted during the global financial crisis helped to sustain the supply of bank lending. The analysis proposes a setup that allows testing for structural shifts in the bank lending equation, and employs a novel dataset covering large international banks headquartered in 14 major advanced economies for the period 1995–2010. While stronger capitalisation sustains loan growth in normal times, banks during a crisis can turn additional capital into greater lending only once their capitalisation exceeds a critical threshold. This suggests that recapitalisations may not translate into greater credit supply until bank balance sheets are sufficiently strengthened.
How far does mobility of multinational banks solve problems of financial development? Using a panel of 80,000 loans over 7 years, I show that greater cultural and geographical distance between a ...foreign bank's headquarters and local branches leads it to further avoid lending to "informationally difficult" yet fundamentally sound firms requiring relational contracting. Greater distance also makes them less likely to bilaterally renegotiate, and less successful at recovering defaults. Differences in bank size, legal institutions, risk preferences, or unobserved borrower heterogeneity cannot explain these results. These distance constraints can be large enough to permanently exclude certain sectors of the economy from financing by foreign banks.
Libor manipulation? Abrantes-Metz, Rosa M.; Kraten, Michael; Metz, Albert D. ...
Journal of banking & finance,
1/2012, Letnik:
36, Številka:
1
Journal Article
Recenzirano
On May 29, 2008 the Wall Street Journal published an article alleging that several global banks were reporting Libor quotes significantly lower than those implied by prevailing credit default swap ...(CDS) spreads. While acknowledging that the "analysis doesn't prove that banks are lying or manipulating Libor," it nevertheless conjectures that these banks may "have been low-balling their borrowing rates to avoid looking desperate for cash." In this paper we compare Libor with other short-term borrowing rates, analyze individual bank quotes, and compare these individual quotes to CDS spreads and market capitalization data during three periods: 1/1/07-8/8/07 (Period 1), 8/9/07-4/16/08 (Period 2), and 4/17/08-5/30/08 (Period 3). We find some anomalous individual quotes, but the evidence is inconsistent with a material manipulation of the US dollar 1-month Libor rate. PUBLICATION ABSTRACT
Do foreign banks perform better than domestic banks? The existing literature has come up with different answers, in part as data coverage has varied and often been limited. Studying the performance ...of foreign relative to domestic banks in many countries between 1999 and 2006, we find that the answer importantly depends on a number of factors. Specifically, foreign banks tend to perform better when from a high income country and when regulation in the host country is relatively weak. They also perform better when larger and having a bigger market share. Foreign banks from home countries with the same language and similar regulation as the host country also perform better. Geographical closeness, however, does not improve performance. These findings show that it is important to control for heterogeneity among foreign banks when studying their performance and help reconcile some contradictory results found in the literature.
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