Liquidity management of U.S. global banks: Internal capital markets in the great recession

Nicola Cetorelli and Linda Goldberg

Journal of International Economics, 2012, vol. 88, issue 2, 299-311

Abstract: The recent crisis highlighted the importance of globally active banks in linking markets. One channel for this linkage is through how these banks manage liquidity across their entire banking organization. We document that funds regularly flow between parent banks and their affiliates in diverse foreign markets. We show that parent banks, when hit by a funding shock, reallocate liquidity in the organization according to a locational pecking order. Affiliate locations that are important for the parent bank revenue streams are relatively protected from liquidity reallocations in the organization, while traditional funding locations are more extensively used to buffer shocks to the parent bank balance sheets.

Keywords: Bank; Global bank; Liquidity; Transmission; Internal capital market; Crisis (search for similar items in EconPapers)
JEL-codes: E44 F36 G32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (230)

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Related works:
Chapter: Liquidity Management of US Global Banks: Internal Capital Markets in the Great Recession (2011)
Working Paper: Liquidity management of U.S. global banks: internal capital markets in the Great Recession (2011)
Working Paper: Liquidity management of U.S. global banks: Internal capital markets in the great recession (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:88:y:2012:i:2:p:299-311

DOI: 10.1016/j.jinteco.2012.05.001

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