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The exposure of international bank loans to third-country risk: an empirical analysis of overdue claims

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  • Drew Dahl
  • Andrew Logan

Abstract

The paper analyses the performance outcomes on foreign credits made by UK-owned banks to borrowers in 17 foreign countries between 1991 and 2000. The analysis is unique in its use of bank-specific data on overdue credits in individual countries. Results indicate that credit repayment in a given country is influenced by exports to, and economic activity in, another country linked by trading relationships. The observed cross-country interdependence is relevant to the understanding of risk management practices of international banks.

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File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2004/WP247.pdf
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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 247.

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Date of creation: Jan 2005
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Handle: RePEc:boe:boeewp:247

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  1. Walter, Ingo, 1981. "Country risk, portfolio decisions and regulation in international bank lending," Journal of Banking & Finance, Elsevier, vol. 5(1), pages 77-92, March.
  2. Viral V. Acharya & Iftekhar Hasan & Anthony Saunders, 2006. "Should Banks Be Diversified? Evidence from Individual Bank Loan Portfolios," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1355-1412, May.
  3. Hammes, Wolfgang & Shapiro, Mark, 2001. "The implications of the new capital adequacy rules for portfolio management of credit assets," Journal of Banking & Finance, Elsevier, vol. 25(1), pages 97-114, January.
  4. Peek, Joe & Rosengren, Eric S, 1997. "The International Transmission of Financial Shocks: The Case of Japan," American Economic Review, American Economic Association, vol. 87(4), pages 495-505, September.
  5. Stefan Weber & Kay Giesecke, 2003. "Credit Contagion and Aggregate Losses," Computing in Economics and Finance 2003 246, Society for Computational Economics.
  6. Massimo Sbracia & Andrea Zaghini, 2001. "Crises and contagion: the role of the banking system," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 241-260 Bank for International Settlements.
  7. Allen Berger, 1994. "The Relationship Between Capital and Earnings in Banking," Center for Financial Institutions Working Papers 94-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
  8. DeYoung, Robert & Nolle, Daniel E, 1996. "Foreign-Owned Banks in the United States: Earning Market Share or Buying It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 622-36, November.
  9. Giesecke, Kay & Weber, Stefan, 2002. "Credit contagion and aggregate losses," SFB 373 Discussion Papers 2002,73, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  10. Renee Fry & Vance Martin & Brenda González-Hermosillo & Mardi Dungey, 2002. "International Contagion Effects from the Russian Crisis and the LTCM Near-Collapse," IMF Working Papers 02/74, International Monetary Fund.
  11. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  12. Douglas Nigh & Kang Rae Cho & Suresh Krishnan, 1986. "The Role of Location-Related Factors in U.S Banking Involvement Abroad: An Empirical Examination," Journal of International Business Studies, Palgrave Macmillan, vol. 17(3), pages 59-72, September.
  13. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, vol. 54(2), pages 293-308, August.
  14. Dornbusch, Rudiger & Park, Yung Chul & Claessens, Stijn, 2000. "Contagion: Understanding How It Spreads," World Bank Research Observer, World Bank Group, vol. 15(2), pages 177-97, August.
  15. Meeker, Larry G. & Gray, Laura, 1987. "A note on non-performing loans as an indicator of asset quality," Journal of Banking & Finance, Elsevier, vol. 11(1), pages 161-168, March.
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