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Financial deglobalisation in banking?

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  • McCauley, Robert N.
  • Bénétrix, Agustín S.
  • McGuire, Patrick M.
  • von Peter, Goetz

Abstract

This paper argues that the decline in cross-border banking since 2007 does not amount to a broad-based retreat in international lending (“financial deglobalisation”). We show that BIS international banking data organised by the nationality of reporting banks provide a clearer picture of international financial integration than the traditional “residence”, or balance-of-payments, view. They show that what appears to be a global shrinkage of bank positions is actually driven by European banks. These banks uniquely responded to credit losses after 2007 by shedding assets abroad to restore capital ratios. Other banking systems’ global footprints, notably those of Japanese, Canadian and even US banks, have expanded since 2007. Using a global dataset of banks’ affiliates (branches and subsidiaries), we demonstrate that the who (i.e., bank nationality) accounts for more of the peak-to-trough shrinkage in foreign claims than does the where (i.e., locational factors). We relate bank nationality in turn to EU membership, which may reflect asset shrinkage required by the EU competition authorities in response to state aid, bank profitability and credit losses.

Suggested Citation

  • McCauley, Robert N. & Bénétrix, Agustín S. & McGuire, Patrick M. & von Peter, Goetz, 2019. "Financial deglobalisation in banking?," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 116-131.
  • Handle: RePEc:eee:jimfin:v:94:y:2019:i:c:p:116-131
    DOI: 10.1016/j.jimonfin.2019.01.011
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    1. Eugenio Cerutti & Catherine Koch & Swapan-Kumar Pradhan, 2020. "Banking across borders: Are Chinese banks different?," BIS Working Papers 892, Bank for International Settlements.
    2. Ca' Zorzi, Michele & Dedola, Luca & Georgiadis, Georgios & Jarociński, Marek & Stracca, Livio & Strasser, Georg, 2020. "Monetary policy and its transmission in a globalised world," Working Paper Series 2407, European Central Bank.
    3. Harald Sander, 2019. "A European Policy Agenda in and for the New Global Economy," Book, University of Warsaw, Faculty of Management, edition 1, volume 1, number y:2019:v:1:ch:3:p:56-87 edited by Justin Yifu Lin & Alojzy Z. Nowak.
    4. Calò, Silvia & Herzberg, Valerie, 2019. "The Future of Global Financial Centres after Brexit: an EU Perspective," Financial Stability Notes 9/FS/19, Central Bank of Ireland.
    5. Lorenz Emter & Martin Schmitz & Marcel Tirpák, 2019. "Cross-border banking in the EU since the crisis: What is driving the great retrenchment?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(2), pages 287-326, May.
    6. John C Caparusso & Yingyuan Chen & Peter Dattels & Rohit Goel & Paul Hiebert, 2019. "Post-Crisis Changes in Global Bank Business Models: A New Taxonomy," IMF Working Papers 2019/295, International Monetary Fund.
    7. Agénor, Pierre-Richard & Jia, Pengfei, 2020. "Capital controls and welfare with cross-border bank capital flows," Journal of Macroeconomics, Elsevier, vol. 65(C).
    8. Avdjiev, Stefan & Gambacorta, Leonardo & Goldberg, Linda S. & Schiaffi, Stefano, 2020. "The shifting drivers of global liquidity," Journal of International Economics, Elsevier, vol. 125(C).
    9. Herzberg, Valerie & McQuade, Peter, 2018. "International bank flows and bank business models since the crisis," Financial Stability Notes 5/FS/18, Central Bank of Ireland.
    10. Etienne Lepers & Rogelio Mercado, Jr., 2020. "Sectoral Capital Flows: Covariates, Co-movements, and Controls," Working Papers wp42, South East Asian Central Banks (SEACEN) Research and Training Centre, revised Dec 2020.
    11. Allen, Cían, 2019. "Revisiting external imbalances: Insights from sectoral accounts," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 67-101.
    12. Mary Everett & Vahagn Galstyan, 0. "Bilateral cross-border banking and macroeconomic determinants," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 0, pages 1-24.
    13. Stefan Avdjiev & Bryan Hardy & Patrick McGuire & Goetz von Peter, 2020. "Home sweet host: Prudential and monetary policy spillovers through global banks," BIS Working Papers 853, Bank for International Settlements.
    14. Everett, Mary & McQuade, Peter & O’Grady, Michael, 2020. "Bank business models as a driver of cross-border activities," Journal of International Money and Finance, Elsevier, vol. 108(C).
    15. Accominotti, Olivier & Brière, Marie & Burietz, Aurore & Oosterlinck, Kim & Szafarz, Ariane, 2020. "Did Globalization Kill Contagion?," CEPR Discussion Papers 14395, C.E.P.R. Discussion Papers.
    16. Gardó, Sándor & Klaus, Benjamin, 2020. "Overcapacities in banking: Measurement, trends and determinants," Economic Modelling, Elsevier, vol. 91(C), pages 819-834.
    17. Mary Everett & Vahagn Galstyan, 2020. "Bilateral cross-border banking and macroeconomic determinants," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 921-944, November.
    18. Viacheslav M. Shavshukov & Natalia A. Zhuravleva, 2020. "Global Economy: New Risks and Leadership Problems," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 8(1), pages 1-17, February.
    19. Herzberg, Valerie & McQuade, Peter, 2018. "International bank flows and bank business models since the crisis," Financial Stability Notes 05-18, Central Bank of Ireland.

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    More about this item

    Keywords

    Financial globalisation; International banking; Consolidation; Bank nationality; Ownership;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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