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Global Deleveraging and Foreign Banks’ Lending to Latin American Countries

Author

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  • Herman Kamil
  • Kulwant Rai

Abstract

The recent global financial turmoil raised questions about the stability of foreign banks’ financing to emerging market countries. W hile foreign banks’ lending growth to most emerging market regions contracted sharply, lending to Latin America and the Caribbean (LAC) was significantly more resilient. Analyzing detailed BIS data on global banks’ lending to twelve LAC countries, we provide evidence showing that countries where a larger share of foreign banks’ lending was channeled through their local affiliates in domestic currency saw a smaller contraction in foreign banks’ credit during the recent crisis. In addition, we find some preliminary evidence suggesting that higher reliance of local affiliates on domestic deposits as a source of funding may have been important in muting the transmission of global financial shocks.

Suggested Citation

  • Herman Kamil & Kulwant Rai, 2013. "Global Deleveraging and Foreign Banks’ Lending to Latin American Countries," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 1-34, January.
    • Handle: RePEc:col:000425:010910
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    Citations

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    Cited by:

    1. Cerutti, Eugenio, 2015. "Drivers of cross-border banking exposures during the crisis," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 340-357.
    2. Jarko Fidrmuc & Svatopluk Kapounek, 2020. "The Risks and Financial Vulnerability of Foreign Bank Ownership in CEECs: Evidence from Exchange Rate Depreciation after the Financial Crisis," Eastern European Economics, Taylor & Francis Journals, vol. 58(1), pages 34-48, January.
    3. Vidal-Tomás, David & Tedeschi, Gabriele & Ripollés, Jordi, 2020. "The desertion of rich countries and the mutual support of the poor ones: Preferential lending agreements among the PIGS," Finance Research Letters, Elsevier, vol. 34(C).

    More about this item

    Keywords

    Banks; global: credit crunch; cross-border lending;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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