Multinational Banks

Stefania Garetto, Martin Goetz and Jose Fillat

No 1256, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper starts by establishing a set of stylized facts about global banks with operations in the United States. First, we show evidence of selection into foreign markets: the parent banks of global conglomerates tend to be larger than national banks. Second, selection by size is related to the mode of foreign operations: foreign subsidiaries of global banks are systematically larger than foreign branches, in terms of deposits, loans, and overall assets. Third, the mode of foreign operations affects the response of global banks to shocks and how those shocks are transmitted across countries. We develop a structural model of entry into global banking whose assumptions mimic the institutional details of the regulatory framework in the US. Heterogeneous, profit-maximizing banks decide whether and how to enter a foreign market. While shedding light on the relationship between market access, capital flows, regulation, and entry, the model rationalizes the observed stylized facts and can be used as a laboratory to perform counterfactual analysis.

Date: 2015
New Economics Papers: this item is included in nep-ban and nep-ifn
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Working Paper: Multinational Banks (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:1256

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