Violent conflict and cross-border lending

Ralph De Haas, Alexander Popov, Mikhail Mamonov and Iliriana Shala

No 3073, Working Paper Series from European Central Bank

Abstract: How do violent conflicts shape cross-border lending? Using data on syndicated loans by 14,021 creditors to firms in 179 countries (1989–2020), we document a dual effect: foreign banks reduce overall lending relative to domestic banks but significantly increase financing to military and dual-use sectors during conflicts. This reallocation is stronger among lenders less specialized in the conflict country, more specialized in military lending, and domiciled in politically non-aligned nations. Effects are geographically contained and temporally limited, dissipating post-conflict. Our findings reveal how global banks strategically redirect credit toward military sectors during armed conflicts, despite reducing overall country exposure. JEL Classification: D74, F34, F40, G15, G21

Keywords: bank specialization; cross-border lending; geopolitical risk; syndicated loans; violent conflict (search for similar items in EconPapers)
Date: 2025-07
New Economics Papers: this item is included in nep-fdg
Note: 861282
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253073

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