Broken relationships: De-risking by correspondent banks and international trade

Lea Borchert, Ralph De Haas, Karolin Kirschenmann and Alison Schultz

No 10/2024, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: We study how terminated correspondent banking relationships affect international trade. Drawing on firm-level export data from emerging Europe, we show that when local banks lose access to correspondent services, their corporate clients experience significant export declines. This trade contraction occurs on both the extensive margin, with fewer firms exporting, and the intensive margin, with existing exporters shipping lower values. Firms only partially offset lost exports with higher domestic sales, resulting in lower total revenues and employment. Other firms cease operations entirely. These firmlevel impacts aggregate to lower industry-level exports in countries more exposed to correspondent bank retrenchment.

Keywords: Correspondent banking; trade finance; de-risking; global banks; international trade; anti-money laundering (search for similar items in EconPapers)
JEL-codes: F14 F15 F36 G21 G28 L14 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/304397/1/1906016658.pdf (application/pdf)

Related works:
Working Paper: Broken Relationships: De-Risking by Correspondent Banks and International Trade (2024)
Working Paper: Broken Relationships: De-Risking by Correspondent Banks and International Trade (2023)
Working Paper: Broken relationships: De-risking by correspondent banks and international trade (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:304397

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