International monetary spillovers in bank profitability and risk-taking

Evangelos Salachas, Georgios Kouretas and Nikiforos T Laopodis

Oxford Economic Papers, 2025, vol. 77, issue 4, 1148-1174

Abstract: This article explores the impact of monetary policy changes on bank profitability and risk-taking in developed countries and BRICS. Utilizing a comprehensive dataset including country- and bank-level data from the Eurozone, the USA, the UK, Japan, and the BRICS, we distinguish between domestic and international monetary policy effects. Our analysis reveals that a monetary policy tightening increases bank profitability and reduces bank risk-taking domestically. Furthermore, we find that central bank decisions in developed countries have notable spillover effects on bank profitability and risk-taking in BRICS banks. These international spillovers operate through an internal funding channel, wherein global parent banks exchange funds with their affiliates.

Keywords: bank risk; bank profitability; bank ownership; monetary policy; developed countries; BRICS (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G15 G21 (search for similar items in EconPapers)
Date: 2025
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