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Internal capital markets and lending by multinational bank subsidiaries

Author

Listed:
  • Ralph De Haas

    (European Bank for Reconstruction and Development)

  • Iman Van Lelyveld

    (De Nederlandsche Bank)

Abstract

A defining feature of the banking systems in many transition countries is the large-scale presence of subsidiaries of multinational banks. We use new panel data on the intra-group ownership structure and the balance sheets of 45 of the largest banking groups in the world to analyse what determines the credit growth of their subsidiaries, many of which are in central and eastern Europe. We find that parent banks trade-off lending across several countries (“substitution effect”) and that they support weak subsidiaries (“support effect”). This provides evidence for the existence of internal capital markets through which multinational banks manage the credit growth of their subsidiaries. Greenfield subsidiaries are most closely integrated into such internal capital markets.

Suggested Citation

  • Ralph De Haas & Iman Van Lelyveld, 2008. "Internal capital markets and lending by multinational bank subsidiaries," Working Papers 105, European Bank for Reconstruction and Development, Office of the Chief Economist.
    • Handle: RePEc:ebd:wpaper:105
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    More about this item

    Keywords

    multinational banks; credit supply; internal capital markets;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • 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

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