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International Banking and Liquidity Risk Transmission: Evidence from Germany

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  • Cornelia Kerl
  • Cathérine Koch

Abstract

This paper explores the lending business and internal capital markets of German banks during periods of liquidity stress and government support. The analysis yields three key findings. First, when liquidity conditions deteriorate, cross-sectional differences in balance sheet characteristics impact the responses while reflecting the respective business models and geographical focus of large as distinct from small banks. Second, large and small banks, on the whole, shift lending away from international markets to the domestic market when drawing on government support during periods of liquidity stress. These findings point to the bank-specific requirements attached to the receipt of government support. Third, government support did not prevent banks focused on the domestic market from transmitting liquidity shocks to their affiliated banks abroad.

Suggested Citation

  • Cornelia Kerl & Cathérine Koch, 2015. "International Banking and Liquidity Risk Transmission: Evidence from Germany," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(3), pages 496-514, November.
    • Handle: RePEc:pal:imfecr:v:63:y:2015:i:3:p:496-514
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    Cited by:

    1. Jana Ohls & Marcus Pramor & Lena Tonzer, 2017. "International Banking and Cross-Border Effects of Regulation: Lessons from Germany," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 129-162, March.
    2. Claudia Buch & Catherine Koch & Michael Koetter, 2016. "Crises and rescues: liquidity transmission through international banks," BIS Working Papers 576, Bank for International Settlements.
    3. Nicola Cetorelli & Linda S. Goldberg, 2016. "Organizational complexity and balance sheet management in global banks," Staff Reports 772, Federal Reserve Bank of New York.
    4. Eichacker, Nina, 2020. "German Public Banks, Financial Competition, and Crisis: Institutional Change in German Banking and Financial Vulnerability Before the Global Financial Crisis," SocArXiv jkp5u, Center for Open Science.

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