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Geopolitical Risk and Banking Activity: An Asset–Liability Perspective

Author

Listed:
  • Carlos Giraldo

    (Fondo Latinoamericano de Reservas - FLAR)

  • Iader Giraldo-Salazar

    (Fondo Latinoamericano de Reservas - FLAR)

  • Jose E. Gomez-Gonzalez

    (Department of Finance, Information Systems, and Economics, City University of New York – Lehman College)

  • Jorge M Uribe

    (Universitat Oberta de Catalunya)

Abstract

This paper studies how geopolitical risk affects banking activity in emerging economies by examining both loan growth and deposit growth. Using a panel of 1,281 banks across 21 emerging countries between 2011 and 2021, we find that increases in geopolitical risk significantly reduce both lending and deposits. The results suggest that geopolitical shocks affect banks not only through higher uncertainty and weaker economic conditions, but also through disruptions in funding stability. In this sense, geopolitical risk appears to operate through a mechanism like the traditional bank lending channel, where weaker deposit growth constrains banks’ ability to extend credit. The findings also reveal important regional differences, with stronger effects in Sub-Saharan Africa, and show that the impact of geopolitical shocks persists over time. Overall, the paper highlights geopolitical risk as an increasingly important source of financial vulnerability in emerging banking systems.

Suggested Citation

  • Carlos Giraldo & Iader Giraldo-Salazar & Jose E. Gomez-Gonzalez & Jorge M Uribe, 2026. "Geopolitical Risk and Banking Activity: An Asset–Liability Perspective," Documentos de trabajo 023052, FLAR.
    • Handle: RePEc:col:000566:023052
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    Keywords

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    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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