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

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  • Alicia García-Herrero

    () (Banco de España)

  • María Soledad Martínez-Pería

    () (World Bank)

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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File URL: http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0525e.pdf
File Function: First version, August 2005
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Bibliographic Info

Paper provided by Banco de España in its series Banco de España Working Papers with number 0525.

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Length: 35 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:bde:wpaper:0525

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Keywords: foreign bank financing; financial fdi; cross-border claims;

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Cited by:
  1. Beck, Thorsten, 2006. "Creating an efficient financial system : challenges in a global economy," Policy Research Working Paper Series 3856, The World Bank.
  2. Reza Y Siregar & Keen Meng Choy, 2010. "Determinants of International Bank Lending from the Developed World to East Asia," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 484-516, June.
  3. Sophie Brana & Delphine Lahet, 2011. "Foreign banks and the stability of foreign and domestic credit in CEECs," Working Papers hal-00637686, HAL.
  4. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & C. Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & R. Sabbatini & H. Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in The Euro Area: a Summary of New Micro Evidence," Working Papers w200605, Banco de Portugal, Economics and Research Department.
  5. Claessens, Stijn, 2006. "Competitive implications of cross-border banking," Policy Research Working Paper Series 3854, The World Bank.
  6. 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, vol. 23(C), pages 136-162.
  7. Georgios Fotopoulos & Helen Louri, 2011. "On the geography of international banking: the role of third-country effects," Working Papers 125, Bank of Greece.
  8. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics 8222, University of Munich, Department of Economics.
  9. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.

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