Crises and Rescues: Liquidity Transmission through Global Banks

Claudia Buch, Cathérine Koch and Michael Koetter
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Cathérine Koch: Bank for International Settlements
Authors registered in the RePEc Author Service: Catherine Tahmee Casanova

International Journal of Central Banking, 2018, vol. 14, issue 4, 187-228

Abstract: This paper shows that global banks transmit liquidity shocks via their network of foreign affiliates. We use the (unexpected) access of German banks' affiliates located in the United States to the Federal Reserve's Term Auction Facility. We condition on the parent banks' U.S. dollar funding needs in order to examine how affiliates located outside the United States adjusted their balance sheets when the U.S. affiliate of the same parent tapped into TAF liquidity. Our research has three main findings. First, affiliates tied to parents with higher U.S. dollar funding needs expanded their foreign assets during periods of active TAF borrowing. Second, the overall effects are driven by affiliates located in financial centers. Third, U.S.- dollar-denominated lending particularly increased in response to the TAF program.

JEL-codes: F34 G01 G21 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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