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Banks’ Foreign Credit Exposures and Borrowers’ Rollover Risks Measurement, Evolution and Determinants

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  • Eugenio Cerutti

Abstract

The recent crises highlighted the role of cross-border banking linkages. This paper proposes two new measures for better capturing creditor banking systems’ foreign credit exposures and borrower countries’ reliance on foreign bank credit, by combining BIS data with bank-level data. The results indicate that the proposed refinements matter, especially when foreign bank affiliates’ funding relies heavily on local deposits. In addition, after developing novel and necessary break-in-series and exchange rate variation adjustments, estimations looking at the driving factors of both measures during 2006-2012 highlight: (i) the role of systemic banking crises and global financial conditions in the evolution of banks’ foreign credit exposures; (ii) the role of a larger set of factors in the case of the evolution of borrower countries’ reliance on foreign bank credit—how countries borrowed, from whom they borrowed, and global financial and domestic demand conditions.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/9.

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Length: 44
Date of creation: 11 Jan 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/9

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Related research

Keywords: Banking systems; Bank credit; Borrowing; International banks; Credit risk; Systemic risks; contagion; vulnerabilities; claims; banking statistics; banking crisis; systemic banking crisis; bank lending; banking sector; banking crises; banking sectors; bank crisis; bankers; bank funding; bank deposit; bank balance sheet; bank claims; bank markets; bank group; bank problems; balance sheet analysis; bank linkages; confidentiality; banking sector assets; bank exposure; bank borrowers; foreign exchange; jurisdiction; bank borrowing; bank regulators; bank subsidiaries; bank structure; bank solvency; bank financing; bank exposures;

References

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  1. Cerutti, Eugenio & Dell'Ariccia, Giovanni & Martinez Peria, Maria Soledad, 2007. "How banks go abroad: Branches or subsidiaries?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(6), pages 1669-1692, June.
  2. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, December.
  3. Eugenio Cerutti & Christian Schmieder, 2012. "The Need for "Un-consolidating" Consolidated Banks' Stress Tests," IMF Working Papers 12/288, International Monetary Fund.
  4. Ralph De Haas & Neeltje Van Horen, 2013. "Running for the Exit? International Bank Lending During a Financial Crisis," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 26(1), pages 244-285.
  5. Ingo Fender & Patrick McGuire, 2010. "Bank structure, funding risk and the transmission of shocks across countries: concepts and measurement," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, September.
  6. Ralph de Haas & Iman van Lelyveld, 2006. "Internal Capital Markets and Lending by Multinational Bank Subsidiaries," DNB Working Papers, Netherlands Central Bank, Research Department 101, Netherlands Central Bank, Research Department.
  7. Linda S. Goldberg, 2001. "When is U.S. bank lending to emerging markets volatile?," Staff Reports, Federal Reserve Bank of New York 119, Federal Reserve Bank of New York.
  8. Aneta Hryckiewicz & Oskar Kowalewski, 2011. "Why Do Foreign Banks Withdraw from Other Countries?," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 14(1), pages 67-102, 04.
  9. Eugenio Cerutti & Patrick M. McGuire & Stijn Claessens, 2011. "Systemic Risks in Global Banking," IMF Working Papers 11/222, International Monetary Fund.
  10. Stijn Claessens & Giovanni Dell'Ariccia & Deniz Igan & Luc Laeven, 2010. "Cross-country experiences and policy implications from the global financial crisis," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 25, pages 267-293, 04.
  11. Giovanni Dell'Ariccia & Robert Marquez, 2010. "Risk and the Corporate Structure of Banks," Journal of Finance, American Finance Association, American Finance Association, vol. 65(3), pages 1075-1096, 06.
  12. Stefan Afdjiev & Zsolt Kuti & Elod Takáts, 2012. "The euro area crisis and cross-border bank lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, December.
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Citations

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Cited by:
  1. Caroline Van Rijckeghem & Beatrice Weder di Mauro, 2013. "Financial Deglobalization: Is The World Getting Smaller?," Working Papers, Bogazici University, Department of Economics 2013/14, Bogazici University, Department of Economics.
  2. Hale, Galina B & Obstfeld, Maurice, 2014. "The Euro and the Geography of International Debt Flows," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9937, C.E.P.R. Discussion Papers.
  3. Cerutti, Eugenio & Hale, Galina & Minoiu, Camelia, 2014. "Financial crises and the composition of cross-border lending," Working Paper Series, Federal Reserve Bank of San Francisco 2014-20, Federal Reserve Bank of San Francisco.

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