Liquidity Risk and U.S. Bank Lending at Home and Abroad

Ricardo Correa, Linda Goldberg and Tara Rice

No 20285, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: While the balance sheet structure of U.S. banks influences how they respond to liquidity risks, the mechanisms for the effects on and consequences for lending vary widely across banks. We demonstrate fundamental differences across banks without foreign affiliates versus those with foreign affiliates. Among the nonglobal banks (those without a foreign affiliate), cross-sectional differences in response to liquidity risk depend on the banks' shares of core deposit funding. By contrast, differences across global banks (those with foreign affiliates) are associated with ex ante liquidity management strategies as reflected in internal borrowing across the global organization. This intra-firm borrowing by banks serves as a shock absorber and affects lending patterns to domestic and foreign customers. The use of official-sector emergency liquidity facilities by global and nonglobal banks in response to market liquidity risks tends to reduce the importance of ex ante differences in balance sheets as drivers of cross-sectional differences in lending.

JEL-codes: F3 G21 G38 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-ban and nep-rmg
Note: IFM
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Liquidity Risk and U.S. Bank Lending at Home and Abroad (2014)
Working Paper: Liquidity risk and U.S. bank lending at home and abroad (2014)
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