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International shock transmission after the Lehman Brothers collapse – evidence from syndicated lending

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  • Ralph De Haas

    ()
    (EBRD)

  • Neeltje Van Horen

    ()
    (De Nederlandsche Bank)

Abstract

After Lehman Brothers filed for bankruptcy in September 2008, cross-border bank lending contracted sharply. To explain the severity and variation in this contraction, we analyse detailed data on cross-border syndicated lending by 75 banks to 59 countries. We find that banks that had to write down sub-prime assets, refinance large amounts of long-term debt, and experienced sharp declines in their market-to-book ratio, transmitted these shocks across borders by curtailing their lending abroad. While shocked banks differentiated among countries in much the same way as less constrained banks, they restricted their lending more to small borrowers.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 142.

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Length: 11 pages
Date of creation: Jan 2012
Date of revision:
Publication status: Published in Working papers 142, European Bank for Reconstruction and Development
Handle: RePEc:ebd:wpaper:142

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Web page: http://www.ebrd.com/pages/research/publications/workingpapers.shtml
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Keywords: Crisis transmission; cross-border lending; syndicated loans;

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References

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  1. Eric S. Rosengren & Joe Peek, 2000. "Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States," American Economic Review, American Economic Association, vol. 90(1), pages 30-45, March.
  2. Ralph De Haas & Neeltje Van Horen, 2011. "Running for the exit: international banks and crisis transmission," Working Papers 124, European Bank for Reconstruction and Development, Office of the Chief Economist.
  3. Ralph Chami & Thomas F. Cosimano, 2001. "Monetary Policy with a Touch of Basel," IMF Working Papers 01/151, International Monetary Fund.
  4. Giannetti, Mariassunta & Laeven, Luc, 2011. "The Flight Home Effect: Evidence from the Syndicated Loan Market During Financial Crises," CEPR Discussion Papers 8337, C.E.P.R. Discussion Papers.
  5. Nicola Cetorelli & Linda S. Goldberg, 2010. "Global Banks and International Shock Transmission: Evidence from the Crisis," NBER Working Papers 15974, National Bureau of Economic Research, Inc.
  6. Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
  7. Heitor Almeida & Murillo Campello & Bruno Laranjeira & Scott Weisbenner, 2009. "Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis," NBER Working Papers 14990, National Bureau of Economic Research, Inc.
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Cited by:
  1. Cetorelli, Nicola & Goldberg, Linda S., 2012. "Liquidity management of U.S. global banks: Internal capital markets in the great recession," Journal of International Economics, Elsevier, vol. 88(2), pages 299-311.
  2. Kapan, Tümer & Minoiu, Camelia, 2013. "Balance sheet strength and bank lending during the global financial crisis," Discussion Papers 33/2013, Deutsche Bundesbank, Research Centre.
  3. Victor Pontines & Reza Y. Siregar, 2012. "How Should We Bank With Foreigners? An Empirical Assessment of Lending Behaviour of International Banks to Six East Asian Economies," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ54, янваÑ.
  4. Stijn Claessens & Neeltje van Horen, 2013. "Impact of Foreign Banks," DNB Working Papers 370, Netherlands Central Bank, Research Department.
  5. Marcello Bofondi & Luisa Carpinelli & Enrico Sette, 2013. "Credit supply during a sovereign debt crisis," Temi di discussione (Economic working papers) 909, Bank of Italy, Economic Research and International Relations Area.
  6. Gianni La Cava, 2013. "Liquidity Shocks and the US Housing Credit Crisis of 2007–2008," RBA Research Discussion Papers rdp2013-05, Reserve Bank of Australia.
  7. Jeon, Bang & Olivero, María & Wu, Ji, 2012. "Multinational Banking and the International Transmission of Financial Shocks: Evidence from Foreign Bank Subsidiaries," School of Economics Working Paper Series 2012-2, LeBow College of Business, Drexel University.
  8. Ralph De Haas & Yevgeniya Korniyenko & Elena Loukoianova & Alexander Pivovarsky, 2012. "Foreign Banks and the Vienna Initiative: Turning Sinners into Saints?," Mo.Fi.R. Working Papers 62, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  9. Lahnsteiner, Mathias & Vogel, Ursula & Hameter, Markus, 2012. "Intra-Group Cross-Border Credit and Roll-Over Risks in CESEE – Evidence from Austrian Banks," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 23.
  10. Adams-Kane, Jonathon & Caballero, Julian A. & Lim, Jamus Jerome, 2013. "Foreign bank behavior during financial crises," Policy Research Working Paper Series 6590, The World Bank.
  11. Düwel, Cornelia, 2013. "Repo funding and internal capital markets in the financial crisis," Discussion Papers 16/2013, Deutsche Bundesbank, Research Centre.
  12. Linda S. Goldberg, 2013. "Banking globalization, transmission, and monetary policy autonomy," Staff Reports 640, Federal Reserve Bank of New York.
  13. Shekhar Aiyar & Sonali Jain-Chandra, 2012. "The Domestic Credit Supply Response to International Bank Deleveraging: Is Asia Different?," IMF Working Papers 12/258, International Monetary Fund.

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