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Financial deglobalisation in banking?

Robert McCauley (), Agustín Bénétrix (), Patrick McGuire and Goetz von Peter ()

Economic Papers from Trinity College Dublin, Economics Department

Abstract: This paper argues that the decline in cross-border banking since 2007 does not amount to a broad-based retreat in international lending (“financial deglobalisation”). We show that BIS international banking data organised by the nationality of ownership (“consolidated view”) provide a clearer picture of international financial integration than the traditional balance-of-payments measure. On the consolidated view, what appears to be a global shrinkage of international banking is confined to European banks, which uniquely responded to credit losses after 2007 by shedding assets abroad – in particular, reducing lending – to restore capital ratios. Other banking systems’ global footprint, notably those of Japanese, Canadian and even US banks, has expanded since 2007. Using a global dataset of banks’ affiliates (branches and subsidiaries), we demonstrate that the who (nationality) accounts for more of the peak-to-trough shrinkage of foreign claims than does the where (locational factors). These findings suggest that the contraction in global lending can be interpreted as cyclical deleveraging of European banks’ large overseas operations, rather than broad-based financial deglobalisation.

Keywords: Financial globalisation, international banking; consolidation; ownership (search for similar items in EconPapers)
JEL-codes: F36 F4 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-ifn
Date: 2017-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

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