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Drivers of structural change in cross-border banking since the global financial crisis

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  • Bremus, Franziska
  • Fratzscher, Marcel

Abstract

The paper analyzes the effects of changes to regulatory policy and to monetary policy on cross-border bank lending since the global financial crisis. Cross-border bank lending has decreased, and the home bias in the credit portfolio of banks has risen sharply, especially among banks in the euro area. Our results suggest that expansionary monetary policy in the source countries – as measured by the change in reserves held at central banks – has encouraged cross-border lending, both in euro area and non-euro area countries. Regarding regulatory policy, increases in financial supervisory power or independencve of the supervisory authorities have encouraged credit outflows from source countries. The findings thus underline the importance of regulatory arbitrage as a driver of cross-border bank flows since the global financial crisis. However, in the euro area, arbitrage in capital stringency was linked to lower cross-border lending since the crisis.

Suggested Citation

  • Bremus, Franziska & Fratzscher, Marcel, 2015. "Drivers of structural change in cross-border banking since the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 32-59.
  • Handle: RePEc:eee:jimfin:v:52:y:2015:i:c:p:32-59
    DOI: 10.1016/j.jimonfin.2014.11.012
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    More about this item

    Keywords

    Cross-border bank lending; Financial integration; Regulation; Arbitrage; Monetary policy; Home bias;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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