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Multinational Banks

Author

Listed:
  • Stefania Garetto

    (Boston University)

  • Martin Goetz

    (Goethe University, Frankfurt am Main)

  • Jose Fillat

    (Federal Reserve Bank of Boston)

Abstract

This paper starts by establishing a set of stylized facts about global banks with operations in the United States. First, we show evidence of selection into foreign markets: the parent banks of global conglomerates tend to be larger than national banks. Second, selection by size is related to the mode of foreign operations: foreign subsidiaries of global banks are systematically larger than foreign branches, in terms of deposits, loans, and overall assets. Third, the mode of foreign operations affects the response of global banks to shocks and how those shocks are transmitted across countries. We develop a structural model of entry into global banking whose assumptions mimic the institutional details of the regulatory framework in the US. Heterogeneous, profit-maximizing banks decide whether and how to enter a foreign market. While shedding light on the relationship between market access, capital flows, regulation, and entry, the model rationalizes the observed stylized facts and can be used as a laboratory to perform counterfactual analysis.

Suggested Citation

  • Stefania Garetto & Martin Goetz & Jose Fillat, 2015. "Multinational Banks," 2015 Meeting Papers 1256, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1256
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    Cited by:

    1. Sebastian Doerr & Philipp Schaz, 2018. "Bank loan supply during crises: the importance of geographic diversification," ECON - Working Papers 288, Department of Economics - University of Zurich, revised Mar 2019.
    2. Temesvary, Judit, 2018. "The transmission of foreign monetary policy shocks into the United States through foreign banks," Journal of Financial Stability, Elsevier, vol. 39(C), pages 104-124.

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