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Running for the exit: international banks and crisis transmission

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  • Ralph De Haas

    (EBRD)

  • Neeltje Van Horen

    (De Nederlandsche Bank)

Abstract

The global financial crisis has reignited the debate about the risks of financial globalisation, in particular the international transmission of financial shocks. We use data on individual loans by the largest international banks to their various countries of operations to examine whether banks’ access to borrower information affected the transmission of the financial shock across borders. The simultaneous use of country and bank-fixed effects allows us to disentangle credit supply and demand and to control for general bank characteristics. We find that during the crisis banks continued to lend more to countries that are geographically close, where they are integrated into a network of domestic co-lenders, and where they had gained experience by building relationships with (repeat) borrowers.

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Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 124.

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Length: 43 pages
Date of creation: Feb 2011
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Handle: RePEc:ebd:wpaper:124

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