How CCyBs travel – Internal capital markets & domestic borrowing

Imbierowicz, Björn, Axel Loeffler, Steven Ongena and Ursula Vogel

No 21413, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We examine how foreign macroprudential tightening transmits through multinational firms’ internal capital markets. Using subsidiary exposure to countercyclical capital buffer (CCyB) increases, we find that while bank credit to subsidiaries falls 10 percent, parents fully substitute this via internal debt. Parents refinance this internal support by increasing borrowing from domestic banks and nonbanks, meeting the substitution needs of their subsidiaries. As a result, foreign CCyB tightening increases the exposure and risk borne by the parent’s home jurisdiction. These findings reveal an unintended spillover: tightening in one country raises credit exposure and thereby borrower risk borne by lenders elsewhere through proactive internal financial redistributions within multinational corporations.

Keywords: G21 (search for similar items in EconPapers)
Date: 2026-04
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