bank integration and state business cycles we investigate how integration of bank ownership across states has affected economic volatility within states in theory bank integration could cause higher or lower volatility depending on whether credit supply or credit demand shocks predominate in fact year to year fluctuations in a state s economic growth fall as its banks become more integrated via holding companies with banks in other states as the bank linkages between any pair of states increase fluctuations in those two states tend to converge we conclude that interstate banking has made state business cycles smaller but more alike i introduction the united states banking system was once anything but united until 1978 every state in the union barred banks from other states so instead of one national banking system we had more like 50 little banking systems one per state 1 once states opened their borders to out of state banks bank holding companies marched in and bought up or merged with banks all over the country in 1975 just 10 percent of the bank assets in the typical state were owned by a multistate bank holding company by 1994 this interstate bank asset ratio had risen to 60 percent figure i our paper investigates how the advent of interstate banking integration in the united states has affected economic volatility within states with the united states balkanized banking system the fate of a state and its banks were closely tied as went the state so went the banks the farm price deflation in the early 1980s bankrupted many farmers and many farm banks falling oil prices in the mid 1980s wiped out a lot of texans and a lot of texas banks shocks to commodity prices probably caused these contractions but frictions in the banking sector may have aggravated them by allowing a freer flow of bank capital and lending among states we maintain that interstate banking will reduce the drag that banking frictions can have on economic contractions

relationship banking fragility and the asset liability matching problem we address a fundamental question in relationship banking why do banks that make relationship loans finance themselves primarily with core deposits and when would it be optimal to finance such loans with purchased money we show that not only are relationship loans informationally opaque and illiquid but they also require the relationship between the bank and the borrower to endure in order for the bank to add value however the informational opacity of relationship loans gives rise to endogenous withdrawal risk that makes the bank fragile core deposits are an attractive funding source for such loans because the bank provides liquidity services to core depositors and this diminishes the likelihood of premature deposit withdrawal thereby facilitating the continuity of relationship loans that is we show that banks will wish to match the highest value added liabilities with the highest value added loans and that doing so simultaneously minimizes the bank s fragility owing to withdrawal risk and maximizes the value the bank adds in relationship lending we also examine the impact of interbank competition on the bank s asset liability matching and extract numerous testable predictions

bank ownership and performance does politics matter this paper uses a new dataset to reassess the relationship between bank ownership and bank performance providing separate estimations for developing and industrial countries it finds that state owned banks located in developing countries tend to have lower profitability and higher costs than their private counterparts and that the opposite is true for foreign owned banks the paper finds no strong correlation between ownership and performance for banks located in industrial countries next in order to test whether the differential in performance between public and private banks is driven by political considerations the paper checks whether this differential widens during election years it finds strong support for this hypothesis

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

cross border banking credit access and the financial crisis abstract we study the sensitivity of credit supply to bank financial conditions in 16 emerging european countries before and during the financial crisis we use survey data on 10 701 applicant and non applicant firms that enable us to disentangle effects driven by positive and negative shocks to the banking system from demand shocks that may vary across lenders we find strong evidence that firms access to credit was affected by changes in the financial conditions of their banks during the crisis firms were more credit constrained if they were dealing with banks that experienced a decline in equity and tier 1 capital as well as losses on financial assets we also find that access to credit reflects the balance sheet conditions of foreign parent banks the effect of positive and negative shocks to a bank is greater for riskier firms and firms with fewer tangible assets

international shock transmission after the lehman brothers collapse evidence from syndicated lending after lehman brothers filed for bankruptcy in september 2008 cross border bank lending contracted sharply to explain the severity and variation in this contraction we analyze detailed data on cross border syndicated lending by 75 banks to 59 countries we find that banks that had to write down sub prime assets refinance large amounts of long term debt and experienced sharp declines in their market to book ratio transmitted these shocks across borders by curtailing their lending abroad while shocked banks differentiated between countries in much the same way as less constrained banks they restricted their lending more to small borrowers

the drivers of foreign bank lending in central and eastern europe the roles of parent subsidiary and host market traits we analyze the relative roles of subsidiary and parent banking group traits in driving foreign banks lending patterns in the central and eastern european cee region before and during the crisis we use a bank level dataset on western european banking groups and their cee subsidiaries over the 2002 2013 period we find that lower capital to asset ratios and higher non performing loans npl ratios at either the subsidiary or the parent bank level significantly lowered subsidiary lending growth before and during the crisis the onset of the crisis not only lowered subsidiary lending growth in the cee countries but also has altered the relationship between balance sheet conditions and lending growth however we also find strong evidence that this crisis effect is significantly less pronounced for subsidiaries participating in the vienna initiative our results policy implications include purging banks of npls enhanced regulatory coordination and the inclusion of parent bank traits in countercyclical capital buffer calculations

foreign banks and credit stability in central and eastern europe a panel data analysis abstract we examine whether foreign and domestic banks in central and eastern europe react differently to business cycles and banking crises our panel dataset comprises data of more than 250 banks for the period 1993 2000 with information on bank ownership and mode of entry during crisis periods domestic banks contracted their credit base whereas greenfield foreign banks did not also home country conditions matter for foreign bank growth as there is a significant negative relationship between home country economic growth and host country credit by greenfields finally greenfield foreign banks credit growth is influenced by the health of the parent bank

internal capital markets and corporate politics in a banking group we analyze proprietary internal capital allocation data from a large retail banking group consisting of member banks and a headquarters organization we find that capital allocations from headquarters compensate for deposit shortfalls on the bank level suggesting that the headquarters offers deposit smoothing to member banks we then analyze how the distribution of influence within the group relates to capital allocations and lending behavior more influential banks are allocated more funds from headquarters and their loan growth is less sensitive to their deposit base the effects of influence are stronger if banks have a greater demand for deposit smoothing

moving costs and housing demand abstract several recent housing demand studies use samples of recent movers based on the presumption that only such households are on their demand curves we find contrary to this presumption that the absolute values of the residuals from a standard housing demand equation fall with duration in the present dwelling this shows that the correlation pattern between housing and the explanatory variables at the moving date does not correspond to the average pattern over a typical housing spell we interpret this as evidence of forward looking behavior and show how it may be handled in econometric work with cross section samples

liquidity management of u s global banks internal capital markets in the great recession abstract the recent crisis highlighted the importance of globally active banks in linking markets one channel for this linkage is through how these banks manage liquidity across their entire banking organization we document that funds regularly flow between parent banks and their affiliates in diverse foreign markets we show that parent banks when hit by a funding shock reallocate liquidity in the organization according to a locational pecking order affiliate locations that are important for the parent bank revenue streams are relatively protected from liquidity reallocations in the organization while traditional funding locations are more extensively used to buffer shocks to the parent bank balance sheets

how foreign participation and market concentration impact bank spreads evidence from latin america increasing foreign participation and high concentration levels characterize the recent evolution of banking sectors market structures in developing countries the authors analyze the impact of these factors on latin american bank spreads during the late 1990s their results suggest that foreign banks were able to charge lower spreads relative to domestic banks this was more so for de novo foreign banks than for those that entered through acquisitions the overall level of foreign bank participation seemed to influence spreads indirectly primarily through its effect on administrative costs bank concentration was positively and directly related to both higher spreads and costs

household behaviour in times of political change evidence from egypt abstract using representative household survey data we study the short term effects of the 2011 egyptian uprisings on household behaviour in terms of education and health expenditure as well as savings we construct a measure of political instability by analysing the number of fatalities during political protests throughout the country difference in difference estimations show that affected households increased spending on education especially on their sons higher education the increase in education expenditure is particularly prominent in areas where households were in favour of a regime change we argue that after the fall of mubarak those households had a positive outlook towards the future with better labour market prospects and therefore invested more in their sons education at the same time households decreased spending on health and increased savings which can be interpreted as precautionary behaviour our results are robust to placebo tests excluding cairo spillovers and alternative ways of measuring political instability

follow the money quantifying domestic effects of foreign bank shocks in the great recession the financial crises have focused consider able academic and policy attention on the roles of foreign banks in transmitting shocks and creating vulnerability for host or parent countries adverse consequences are presumed and a premise of their destabilizing behavior in particular surrounding the branches of foreign banks has taken hold global banks actively allocate funds across their banking organizations in normal times and in stress periods cetorelli and goldberg forthcoming during the great recession some for eign locations of us banks were core investment markets that continued as destinations for funding while other foreign locations served as core funding markets that would send even larger net flows to their parent banks following parent balance sheet disturbances cetorelli and goldberg 2011b in this paper we provide complementary evidence focusing on the perspective of a host country we analyze the activity of foreign banks

a more complete conceptual framework for sme finance abstract we propose a more complete conceptual framework for analysis of sme credit availability issues in this framework lending technologies are the key conduit through which government policies and national financial structures affect credit availability we emphasize a causal chain from policy to financial structures which affect the feasibility and profitability of different lending technologies these technologies in turn have important effects on sme credit availability financial structures include the presence of different financial institution types and the conditions under which they operate lending technologies include several transactions technologies plus relationship lending we argue that the framework implicit in most of the literature is oversimplified neglects key elements of the chain and often yields misleading conclusions a common oversimplification is the treatment of transactions technologies as a homogeneous group unsuitable for serving informationally opaque smes and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque smes

commodity prices and bank lending we analyze the transmission of changes in commodity prices to bank lending in a large sample of developing countries a bank level analysis shows that a fall in commodity net export prices is associated with a reduction of bank lending particularly for commodity exporters and during episodes of terms of trade decline we complement this analysis with loan level data from a credit register which allows us to identify the effect of a commodity price shock on the supply of credit controlling for unobserved factors that could drive borrowers credit demand results show that banks with relatively lower deposits and poor asset quality transmit the changes in commodity prices to lending more aggressively jel f30 f34 g21 q02

the transmission of international shocks a factor augmented var approach the empirical literature on the transmission of international shocks is based on small scale vars in this paper we use a large panel of data for 17 industrialized countries to investigate the international transmission mechanism and revisit the anomalies that arise in the empirical literature we propose a factor augmented var favar that extends the model in bernanke boivin and eliasz 2003 to the open economy the main results can be summarized as follows first the dynamic effects on the uk economy of an unanticipated fall of short term interest rates in the rest of the world are real house price inflation investment gdp and consumption growth peak after one year wages peak after two years cpi and gdp deflator inflation peak during the third year second a positive international supply shock makes the distribution of the components of the uk consumption deflator negatively skewed third in response to a domestic monetary shock we find no evidence of the exchange rate and liquidity puzzles and little evidence of the forward discount and price anomalies

foreign banks trends and impact over the past two decades foreign banks have become much more important in domestic financial intermediation heightening the need to understand their behavior we introduce a new comprehensive database made publicly available on bank ownership including the home country of foreign banks for 5 324 banks in 137 countries over the period 1995 2009 we document large increases in foreign bank presence in many countries but with substantial heterogeneity in terms of host and banks home countries bilateral investment patterns and bank characteristics in terms of impact we document that the relation between private credit and foreign bank presence importantly depends on host country and banks characteristics specifically foreign banks only seem to have a negative impact on credit in low income countries in countries where they have a limited market share where enforcing contracts is costly and where credit information is limited available and when they come from distant home countries this shows that accounting for heterogeneity including bilateral ownership is crucial to better understand the implications of foreign bank ownership

global deleveraging and foreign banks lending to latin american countries proquest denotes formulae omitted lending by foreign banks to emerging markets is a defining feature of finan cial globalization in the years preceding the recent global crisis foreign bank lending to emerging economies expanded rapidly whether directly from parent banks headquarters in advanced economies cross border flows or through their affiliates operating in host countries in the case of latin america lending by foreign banks became a significant source of funding for households and firms over the last decade although there is no consensus on the benefits of foreign banks activity on balance the presence of foreign owned banks is generally believed to have enhanced competition and aided overall financial stability 1after the onset of the global credit crunch in 2008 09 however foreign banks became a potential conduit through which financial stress in advanced economies could spread to emerging markets funding shortages in interbank markets and the need to deleverage bank balance sheets raised concerns that for eign banks would pull back from international lending activities potentially dis rupting macroeconomic and financial stability in emerging market economies 2in latin america the growth rate of total foreign banks credit slowed sig nificantly after the collapse of lehman brothers in the third quarter of 2008 yet crucially the lending behavior of parent banks vis a vis their local affili ates in latin american economies was starkly different cross border lend ing which is mostly denominated in foreign currencies followed a boom bust pattern reversing sharply after the fourth quarter of 2008 in contrast lending by their affiliates operating locally a large share of which is denominated in host countries domestic currencies proved much more resilient and contin ued to expand even amid the financial turmoil this paper explores how the global financial shocks were transmitted to latin american countries through the foreign bank lending channel for this purpose we undertake an econometric analysis of the determinants of foreign banks lending to latin american and caribbean countries using data from the bank for international settlements bis the sample covers twelve latin american countries and spans 1999 the first year for which data are available on a quarterly basis to the first quarter of 2009 at the height of the global credit crunch we assess the effects of three factors that characterized the recent global financial turmoil the freezing of international money markets the deterioration of the financial health of parent banks in advanced economies and more restrictive lending standards in developed countries banking sys tems the sample period used in the paper thus provides an event study of the transmission of the global crisis to foreign banks lending rather than a systematic description of foreign banks reaction to crises to identify the channels of transmission and the possible mitigating fac tors we exploit differences in the geographic structure cross border versus local affiliates and currency mix foreign versus domestic of foreign banks lending to latin american countries at the bilateral level that is between each latin american recipient country and a bis reporting creditor country in a given quarter for this purpose we rely on publicly available data from the bis on the currency structure of foreign banks claims together with confidential bis data on the share of foreign banks total lending extended through local affiliates in both domestic and foreign currencies our results indicate that international money market conditions had a sig nificant impact on foreign banks lending to latin american and caribbean countries in particular an increase in the ted spread caused by liquidity shortages in the global interbank market adversely affects foreign banks lending growth to latin american countries

global banks and crisis transmission abstract we study the effect of financial integration through banks on the transmission of international business cycles in a sample of 18 20 developed countries between 1978 and 2009 we find that in periods without financial crises increases in bilateral banking linkages are associated with more divergent output cycles this relation is significantly weaker during financial turmoil periods suggesting that financial crises induce co movement among more financially integrated countries we also show that countries with stronger direct and indirect financial ties to the u s experienced more synchronized cycles with the u s during the recent 2007 2009 crisis we then interpret these findings using a simple general equilibrium model of international business cycles with banks and shocks to banking activity the model suggests that the relation between integration and synchronization depends on the type of shocks hitting the world economy and that shocks to global banks played an important role in triggering and spreading the 2007 2009 crisis

multinational banks and the global financial crisis weathering the perfect storm 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

foreign bank entry credit allocation and lending rates in emerging markets empirical evidence from poland abstract earlier studies have documented that foreign banks charge lower lending rates and interest spreads than domestic banks we hypothesize that this may stem from the superior efficiency of foreign entrants that they decide to pass onto borrowers performance hypothesis but could also reflect a different loan allocation with respect to borrower transparency loan maturity and currency portfolio composition hypothesis we are able to differentiate between the above hypotheses thanks to a novel dataset containing detailed bank specific information for the polish banking industry our findings demonstrate that banks differ significantly in terms of portfolio composition and we attest to the portfolio composition hypothesis by showing that having controlled for portfolio composition there are no differences in lending rates between banks

from financial crisis to great recession the role of globalized banks this paper provides evidence of the role of globalized banks in transmitting financial stresses to the real economy during the global financial crisis a novel dataset is constructed from quarterly balance sheet reports provided by all uk resident banks to the bank of england i find that the shock to bank funding from non resident creditors was transmitted domestically through a significant reduction in bank credit supply resident subsidiaries and branches of foreign owned banks reduced lending by a larger amount than domestically owned banks while the latter calibrated the reduction in domestic lending more closely to the size of the funding shock