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International banking and liquidity risk transmission: lessons from across countries

Claudia Buch and Linda Goldberg ()

No 675, Staff Reports from Federal Reserve Bank of New York

Abstract: Activities of international banks have been at the core of discussions on the causes and effects of the international financial crisis. Yet we know little about the actual magnitudes and mechanisms for transmission of liquidity shocks through international banks, including the reasons for heterogeneity in transmission across banks. The International Banking Research Network, established in 2012, brings together researchers from around the world with access to micro-level data on individual banks to analyze issues pertaining to global banks. This paper summarizes the common methodology and results of empirical studies conducted in eleven countries to explore liquidity risk transmission. Among the main results is, first, that explanatory power of the empirical model is higher for domestic lending than for international lending. Second, how liquidity risk affects bank lending depends on whether the banks are drawing on official-sector liquidity facilities. Third, liquidity management across global banks can be important for liquidity risk transmission into lending. Fourth, there is substantial heterogeneity in the balance sheet characteristics that affect banks’ responses to liquidity risk. Overall, balance sheet characteristics of banks matter for differentiating their lending responses, mainly in the realm of cross-border lending.

Keywords: international banking; liquidity; transmission; central bank liquidity; uncertainty; regulation; crises (search for similar items in EconPapers)
JEL-codes: F34 G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ifn, nep-opm, nep-reg and nep-rmg
Date: 2014-05-01
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Related works:
Journal Article: International Banking and Liquidity Risk Transmission: Lessons from Across Countries (2015) Downloads
Working Paper: International Banking and Liquidity Risk Transmission: Lessons from Across Countries (2014) Downloads
Working Paper: International banking and liquidity risk transmission: Lessons from across countries (2014) Downloads
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