Banksâ€™ Foreign Credit Exposures and Borrowersâ€™ Rollover Risks Measurement, Evolution and Determinants
The recent crises highlighted the role of cross-border banking linkages. This paper proposes two new measures for better capturing creditor banking systemsâ€™ foreign credit exposures and borrower countriesâ€™ reliance on foreign bank credit, by combining BIS data with bank-level data. The results indicate that the proposed refinements matter, especially when foreign bank affiliatesâ€™ funding relies heavily on local deposits. In addition, after developing novel and necessary break-in-series and exchange rate variation adjustments, estimations looking at the driving factors of both measures during 2006-2012 highlight: (i) the role of systemic banking crises and global financial conditions in the evolution of banksâ€™ foreign credit exposures; (ii) the role of a larger set of factors in the case of the evolution of borrower countriesâ€™ reliance on foreign bank creditâ€”how countries borrowed, from whom they borrowed, and global financial and domestic demand conditions.
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