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Multinational banks and the global financial crisis: weathering the perfect storm?

Author

Listed:
  • Ralph De Haas

    (EBRD)

  • Iman Van Lelyveld

    (De Nederlandsche Bank)

Abstract

We use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the Great Recession with lending by a benchmark group of 202 domestic banks. Contrary to earlier, more contained, crises, parent banks were not a significant source of strength to their subsidiaries during the 2008-09 crisis. As a result, multinational bank subsidiaries had to slow down credit growth about twice as fast as domestic banks. This was particularly the case for subsidiaries of banking groups that relied more on wholesale-market funding. Domestic banks were better equipped to continue lending because of their greater use of deposits, a relatively stable funding source during the crisis. We conclude that while multinational banks may contribute to financial stability during local bouts of financial turmoil, they also increase the risk of “importing” instability from abroad.

Suggested Citation

  • Ralph De Haas & Iman Van Lelyveld, 2011. "Multinational banks and the global financial crisis: weathering the perfect storm?," Working Papers 135, European Bank for Reconstruction and Development, Office of the Chief Economist.
    • Handle: RePEc:ebd:wpaper:135
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    More about this item

    Keywords

    Multinational banks; financial stability; crisis transmission; funding structure;
    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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