Global Deleveraging and Foreign Banks’ Lending to Latin American Countries

Herman Kamil () and Kulwant Rai ()

Economía Journal, 2013, vol. Volume 13 Number 2, issue Spring 2013, 1-34

Abstract: The recent global financial turmoil raised questions about the stability of foreign banks’ financing to emerging market countries. W hile foreign banks’ lending growth to most emerging market regions contracted sharply, lending to Latin America and the Caribbean (LAC) was significantly more resilient. Analyzing detailed BIS data on global banks’ lending to twelve LAC countries, we provide evidence showing that countries where a larger share of foreign banks’ lending was channeled through their local affiliates in domestic currency saw a smaller contraction in foreign banks’ credit during the recent crisis. In addition, we find some preliminary evidence suggesting that higher reliance of local affiliates on domestic deposits as a source of funding may have been important in muting the transmission of global financial shocks.

Keywords: Banks; global: credit crunch; cross-border lending (search for similar items in EconPapers)
JEL-codes: F34 F36 F37 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000425:010910

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