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

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Author Info
Herrero, Alicia Garcia
Martinez Peria, Maria Soledad

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Abstract

The authors analyze the determinants and implications for financial stability of the mix of international banks'claims countries receive. In particular, they 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 U.S., Spanish, and Italian banks'foreign claims across countries, the authors 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, they 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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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3755.

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Date of creation: 01 Oct 2005
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Handle: RePEc:wbk:wbrwps:3755

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Keywords: Banks&Banking Reform; Financial Intermediation; Insurance&Risk Mitigation; Financial Crisis Management&Restructuring; Banking Law;

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Cited by:
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  1. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics 8222, University of Munich, Department of Economics. [Downloadable!]
  2. Claessens, Stijn, 2006. "Competitive implications of cross-border banking," Policy Research Working Paper Series 3854, The World Bank. [Downloadable!]
  3. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December. [Downloadable!]
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