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Financial Stability Paper No 24: The role of external balance sheets in the financial crisis

Author

Listed:
  • Al-Saffar, Yaser

    (Bank of England)

  • Ridinger, Wolfgang

    (Bank of England)

  • Whitaker, Simon

    (Bank of England)

Abstract

Gross external balance sheets are important in explaining the incidence of the financial crisis across economies. Just as for banks, leverage of the national balance sheet was an indicator of subsequent vulnerability. Countries that also experienced strong domestic credit growth, in part fuelled by ‘savings glut’ net capital inflows, suffered particularly badly. And banks’ balance sheets were critical in the transmission mechanism: high gross external interbank debt — the ‘banking glut’ — and maturity and currency mismatches, contributed to foreign rollover risk.

Suggested Citation

  • Al-Saffar, Yaser & Ridinger, Wolfgang & Whitaker, Simon, 2015. "Financial Stability Paper No 24: The role of external balance sheets in the financial crisis," Bank of England Financial Stability Papers 24, Bank of England.
    • Handle: RePEc:boe:finsta:0024
    Note: http://www.bankofengland.co.uk/financialstability/Pages/fpc/fspapers/fs_paper24.aspx
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    More about this item

    Keywords

    financial crises; external balance sheets;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises

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