The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions

Eugenio Cerutti and Stijn Claessens ()

No 2014/180, IMF Working Papers from International Monetary Fund

Abstract: International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.

Keywords: WP; cross-border lending; borrower country; affiliate lending; lender-borrower characteristic; borrower Fe; Global banks; Credit supply; Financial crisis; Deleveraging; International capital markets; Commercial banks; Foreign banks; Cross-border banking; Financial statements; Bank credit; Asia and Pacific; North America; Global (search for similar items in EconPapers)
Pages: 38
Date: 2014-09-25
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Citations: View citations in EconPapers (26)

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Journal Article: The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions (2017)
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