The banking sector and the Swiss financial account during the financial and European debt crises

Raphael Auer and Cédric Tille

No 2016-05, Working Papers from Swiss National Bank

Abstract: The US financial crisis and the later eurozone crisis have substantially impacted capital flows into and out of financial centers like Switzerland. We focus on the pattern of capital flows involving the Swiss banking industry. We first rely on balance-of-payment statistics and show that net banking inflows rose during the acute phases of the crises, albeit with a contrasting pattern. In the wake of the collapse of Lehman Brothers, net inflows were driven by a substantial retrenchment into the domestic market by Swiss banks. By contrast, net inflows from mid-2011 to mid-2012 were driven by large flows into Switzerland by foreign banks. We then use more detailed data from Swiss banking statistics which allow us to differentiate the situation across different banks and currencies. We show that, during the US financial crisis, the bank flows cycle was driven strongly by exposures in US dollars, and to a large extent by Swiss-owned banks. During the eurozone crisis, by contrast, the flight to the Swiss franc and move away from the euro was also driven by banks that are located in Switzerland, yet are foreign-owned. In addition, while the demand for the Swiss franc was driven by both foreign and domestic customers from mid-2011 to early 2013, domestic demand took a prominent role thereafter.

Keywords: Capital flows; safe haven; Switzerland; financial globalization; international banking. (search for similar items in EconPapers)
JEL-codes: E51 F21 F32 F36 F65 G15 G21 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2016
New Economics Papers: this item is included in nep-acc, nep-ban, nep-eec, nep-mac, nep-opm and nep-pke
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Citations: View citations in EconPapers (7)

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Journal Article: The banking sector and the Swiss financial account during the financial and European debt crises (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2016-05

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