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Implications of Liquidity Management of Global Banks for Host Countries - Evidence from Foreign Bank Branches in Hong Kong

Eric Wong, Andrew Tsang () and Steven Kong
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Eric Wong: Hong Kong Monetary Authority
Steven Kong: Hong Kong Monetary Authority

Working Papers from Hong Kong Institute for Monetary Research

Abstract: Using a regulatory dataset of foreign bank branches in Hong Kong, this study finds evidence of the international transmission of funding shocks from home countries of global banks through their internal capital markets during the 2007-08 financial crisis. Global banks are found to buffer parent-bank liquidity shocks by repatriating cross-border internal funding, leading to reductions in loan supply by branches in Hong Kong. Branches with a higher loan-to-asset ratio are estimated to cut loan supply sharper than their counterparts. More liquid assets held by parent banks and central bank liquidity are found to reduce the extent of shock transmission significantly

Keywords: Global Banks; Internal Capital Market; Liquidity Management; Shock Transmission Number: 212014 (search for similar items in EconPapers)
JEL-codes: E44 F36 G32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2014-08
New Economics Papers: this item is included in nep-ban, nep-ifn and nep-mac
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Citations: View citations in EconPapers (5) Track citations by RSS feed

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