Withdrawal from Foreign Lending in the Financial Crisis by Parent Banks and Their Branches and Subsidiaries: Supply Versus Demand Effects

Rainer Frey, Cornelia Kerl () and Alexander Lipponer
Additional contact information
Cornelia Kerl: Deutsche Bundesbank Ludwigstr

Journal of Financial Services Research, 2018, vol. 54, issue 1, No 1, 48 pages

Abstract: Abstract This study investigates the different channels through which internationally active banks can provide loans abroad. Using data on German banks from 2002 to 2010, we contrast determinants for cross-border lending by the parent bank with lending by affiliates located abroad. We show that lending by parent banks is based almost entirely on supply-side determinants, in particular on bank-specific factors. The more the loans are intermediated by banks’ affiliates located abroad, the more relevant become foreign countries’ demand and risk characteristics. This applies in particular when banks operate via locally focused affiliates - rather than regionally active hub affiliates - as well as when the affiliates have the status of branches as opposed to legally independent subsidiaries. In general, banks with a greater risk aversion withdraw more from foreign lending during the financial crisis, especially following the collapse of Lehman Brothers. However, at a Tier I capital ratio of around 11 %, a further increase in the ratio did not affect lending anymore.

Keywords: Foreign lending; Banks; Parents; Affiliates; Branches; Subsidiaries; Risk aversion; Financial crisis (search for similar items in EconPapers)
JEL-codes: F23 F34 G21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10693-016-0260-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jfsres:v:54:y:2018:i:1:d:10.1007_s10693-016-0260-3

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10693

DOI: 10.1007/s10693-016-0260-3

Access Statistics for this article

Journal of Financial Services Research is currently edited by Haluk Unal

More articles in Journal of Financial Services Research from Springer, Western Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().