Global banking and geopolitics through time

Lorenz Emter, Laura Kuitunen, Arnaud Mehl, Peter McQuade, Swapan-Kumar Pradhan and Goetz von Peter

No 1338, BIS Working Papers from Bank for International Settlements

Abstract: This paper examines asymmetries in the effects of geopolitical events on international bank credit, contrasting adverse events, such as the 2022 invasion of Ukraine, with positive events like the fall of the Berlin Wall in 1989. Using confidential data from the BIS International Banking Statistics from 1977 to 2024, we analyze credit dynamics between up to 12,000 pairs of countries through the lens of their geopolitical differences. Our findings reveal that such differences impact international banking activity over time. Negative events reduce credit by 10-20% more between geopolitical blocs than they do within blocs. In contrast, positive events have no comparable effect on credit, even when boosting trade flows. We hypothesize that this asymmetry stems from the higher level of trust required for international bank credit compared to trade in goods, as the former involves a more pronounced intertemporal dimension, demanding a greater degree of commitment over time.

Keywords: geoeconomics; geopolitics; international finance; global banking; residence; nationality; asymmetric effects; trust (search for similar items in EconPapers)
JEL-codes: D74 F2 F3 H56 N40 (search for similar items in EconPapers)
Date: 2026-03
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