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Financial deglobalisation in banking?

Author

Listed:
  • Robert N. McCauley

    () (Bank for International Settlements)

  • Agustín S. Bénétrix

    () (Department of Economics, Trinity College Dublin)

  • Patrick M. McGuire

    () (Bank for International Settlements)

  • Goetz von Peter

    () (Bank for International Settlements)

Abstract

This paper argues that the decline in cross-border banking since 2007 does not amount to a broad-based retreat in international lending (“financial deglobalisation”). We show that BIS international banking data organised by the nationality of ownership (“consolidated view”) provide a clearer picture of international financial integration than the traditional balance-of-payments measure. On the consolidated view, what appears to be a global shrinkage of international banking is confined to European banks, which uniquely responded to credit losses after 2007 by shedding assets abroad – in particular, reducing lending – to restore capital ratios. Other banking systems’ global footprint, notably those of Japanese, Canadian and even US banks, has expanded since 2007. Using a global dataset of banks’ affiliates (branches and subsidiaries), we demonstrate that the who (nationality) accounts for more of the peak-to-trough shrinkage of foreign claims than does the where (locational factors). These findings suggest that the contraction in global lending can be interpreted as cyclical deleveraging of European banks’ large overseas operations, rather than broad-based financial deglobalisation.

Suggested Citation

  • Robert N. McCauley & Agustín S. Bénétrix & Patrick M. McGuire & Goetz von Peter, 2017. "Financial deglobalisation in banking?," Trinity Economics Papers tep1717, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduee:tep1717
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    References listed on IDEAS

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    Cited by:

    1. Emter, Lorenz & Schmitz, Martin & Tirpák, Marcel, 2018. "Cross-border banking in the EU since the crisis: what is driving the great retrenchment?," Working Paper Series 2130, European Central Bank.

    More about this item

    Keywords

    Financial globalisation; international banking; consolidation; ownership;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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