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The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions

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  • Mr. Eugenio M Cerutti
  • Mr. Stijn Claessens
Abstract
International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.

Suggested Citation

  • Mr. Eugenio M Cerutti & Mr. Stijn Claessens, 2014. "The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions," IMF Working Papers 2014/180, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2014/180
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    References listed on IDEAS

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    More about this item

    Keywords

    WP; cross-border lending; borrower country; affiliate lending; lender-borrower characteristic; borrower Fe; Global banks; Credit supply; Financial crisis; Deleveraging; International capital markets; Commercial banks; Foreign banks; Cross-border banking; Financial statements; Bank credit; Asia and Pacific; North America; Global;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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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