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Financial deglobalisation in banking?

Listed author(s):
  • 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)

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.

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File URL: http://www.tcd.ie/Economics/TEP/2017/TEP1717.pdf
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Paper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number tep1717.

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Length: 31 pages
Date of creation: Jul 2017
Handle: RePEc:tcd:tcduee:tep1717
Contact details of provider: Postal:
Trinity College, Dublin 2

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Fax: 6772503
Web page: http://www.tcd.ie/Economics/

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