 Multinational banks' deleveraging in the crisis driven by pre-crisis characteristics and behaviorNo 18/2015, Discussion Papers from Deutsche Bundesbank Abstract: After the collapse of Lehman Brothers, a rapid and far-reaching shrinkage of international banks' assets with a focus on foreign claims took place. For the largest 67 German banking groups, we find that both their characteristics and behavior in the pre-crisis episode had repercussions for the crisis period. Above all, prior non-traditional banking activities - proxied by the relevance of securities and noninterest income - resulted in balance sheet contraction in the crisis. While, from 2002 to mid-2008, a disproportionately high growth rate in profits to assets is found to be indicative of too much risk taking, both high average income and a strong balance sheet expansion in the pre-crisis period are found to be positive per se. In contrast, a high average income or a strong growth in assets in just the last three and a half years before the outbreak of the crisis put balance sheets during the crisis under adjustment pressure. During the crisis, short-term wholesale funding proved to be a disadvantage, while good capital endowment (core Tier 1 capital to RWA ratio), deposit funding and strong affiliate presence abroad had a stabilizing impact. Most of these variables lose their significance in normal times. Keywords: banks; deleveraging; foreign assets; financial crisis; pre crisis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:182015 Access Statistics for this paper More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC. |
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