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Multinational Banks and the Global Financial Crisis. Weathering the Perfect Storm?

Ralph De Haas () and Iman Lelyveld

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: We use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the Great Recession with lending by a benchmark group of 202 domestic banks. Contrary to earlier, more contained crises, parent banks were not a significant source of strength to their subsidiaries during the 2008-09 crisis. As a result, multinational bank subsidiaries had to slow down credit growth about twice as fast as domestic banks. This was in particular the case for subsidiaries of banking groups that relied more on wholesale market funding. Domestic banks were better equipped to continue lending because of their greater use of deposits, a relatively stable funding source during the crisis.We conclude that while multinational banks may contribute to financial stability during local crisis episodes, they also increase the risk of 'importing' instability from abroad.

Keywords: Multinational banks; financial stability; crisis transmission; funding structure (search for similar items in EconPapers)
JEL-codes: F15 F23 F36 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
Date: 2011-11
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Journal Article: Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm? (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:322

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