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The mix of international banks' foreign claims: Determinants and implications

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  • Herrero, Alicia Garcia
  • Martinez Peria, Maria Soledad

Abstract

This paper analyzes the determinants and implications for financial stability of the mix of international banks' claims countries receive. In particular, we distinguish between local claims, extended by international banks through their affiliates in a host (or claim recipient) country, and cross border claims, booked from outside the host country, typically from banks' headquarters in their home countries. Using data on US, Spanish, and Italian banks' foreign claims across countries, we find that the share of local foreign claims is primarily driven by the degree of "freedom" in the host banking sector and by business opportunities in the local market. Entry requirements, startup and informational costs associated with international banking also play a role, but their influence is less robust. Finally, we find that the mix of international bank claims has implications for financial stability, since foreign claim volatility is lower in countries that receive a larger share of local claims.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 31 (2007)
Issue (Month): 6 (June)
Pages: 1613-1631

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Handle: RePEc:eee:jbfina:v:31:y:2007:i:6:p:1613-1631

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Cited by:
  1. Sophie Brana & Delphine Lahet, 2011. "Foreign banks and the stability of foreign and domestic credit in CEECs," Working Papers hal-00637686, HAL.
  2. Siregar, Reza Yamora & Choy, KM, 2009. "Determinants of International Bank Lending from the Developed World to East Asia," MPRA Paper 14989, University Library of Munich, Germany.
  3. Claessens, Stijn, 2006. "Competitive implications of cross-border banking," Policy Research Working Paper Series 3854, The World Bank.
  4. Álvarez, Luis J. & Dhyne, Emmanuel & Hoeberichts, Marco & Kwapil, Claudia & Le Bihan, Hervé & Lünnemann, Patrick & Martins, Fernando & Sabbatini, Roberto & Stahl, Harald & Vermeulen, Philip & Vilmunen, 2006. "Sticky prices in the euro area: a summary of new micro evidence," Discussion Paper Series 1: Economic Studies 2006,02, Deutsche Bundesbank, Research Centre.
  5. Beck, Thorsten, 2006. "Creating an efficient financial system : challenges in a global economy," Policy Research Working Paper Series 3856, The World Bank.
  6. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
  7. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics 8222, University of Munich, Department of Economics.
  8. Müller, Oliver & Uhde, André, 2013. "Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 23(C), pages 136-162.
  9. Mejra Festić, 2011. "The role of the foreign banks in the 5 EU member states," Journal of Business Economics and Management, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(1), pages 189-206, June.
  10. Rong Ma & Susan Pozo, 2012. "International Labor Migration And Foreign Bank Penetration In Developing Economies," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1240004-1-1.
  11. Georgios Fotopoulos & Helen Louri, 2011. "On the geography of international banking: the role of third-country effects," Working Papers 125, Bank of Greece.
  12. Suk‐Joong Kim & Eliza Wu, 2011. "International Bank Flows To Emerging Markets: Influence Of Sovereign Credit Ratings And Their Regional Spillover Effects," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 34(2), pages 331-364, 06.

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