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Broken Relationships: De-Risking by Correspondent Banks and International Trade

Author

Listed:
  • Borchert, Lea
  • De Haas, Ralph
  • Kirschenmann, Karolin
  • Schultz, Alison

Abstract

We study how terminated correspondent banking relationships affect international trade. Drawing on firm-level export data from emerging Europe, we show that when local banks lose access to correspondent services, their corporate clients - especially small- and medium-sized enterprises - experience significant export declines. Firms only partially offset lost exports with higher domestic sales, resulting in lower total revenues and employment. Other firms cease operations entirely. These firm-level impacts aggregate to lower product-level exports from countries more exposed to correspondent bank retrenchment.

Suggested Citation

  • Borchert, Lea & De Haas, Ralph & Kirschenmann, Karolin & Schultz, Alison, 2024. "Broken Relationships: De-Risking by Correspondent Banks and International Trade," CEPR Discussion Papers 19373, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19373
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    Cited by:

    1. is not listed on IDEAS
    2. Igor A. Yakovlev & Antonina А. Tikhonova & Vsevolod Yu. Cherkasov, 2024. "Cross-border Transactions: Challenges and Possible Solutions for BRICS," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 8-23, December.

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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • 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
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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