Broken Relationships: De-Risking by Correspondent Banks and International Trade

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

No 19373, CEPR Discussion Papers from Centre for Economic Policy Research

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 - especially small- and medium-sized enterprises - experience significant export declines. Firms only partially offset lost exports with higher domestic sales, resulting in lower total revenues and employment. Other firms cease operations entirely. These firm-level impacts aggregate to lower product-level exports from countries more exposed to correspondent bank retrenchment.

Keywords: Correspondent; banking (search for similar items in EconPapers)
JEL-codes: F14 F15 F36 G21 G28 L14 (search for similar items in EconPapers)
Date: 2024-08
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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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