Cross‐Border Lending Contagion in Multinational Banks

Derviz, Alexis; Podpiera, Jiří

doi:10.1002/9781118267646.ch37

Cited by 9 publications

(4 citation statements)

References 16 publications

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“…We use data from the Bankscope database. These variables (as in Arakelyan, 2018, De Haas & van Lelyveld, 2006, Derviz & Podpiera, 2007, Haselmann, 2006) measure the degree of capitalization of banks ( capitalization variable assessed via the capital‐to‐assets ratio), the degree of liquidity of assets ( liquidity variable computed via the ratio of liquid assets to total assets), and the quality of the credit portfolio (percentage of nonperforming loans ( NPL variable)). We also calculated a Z score variable to assess the solvency of banks.…”

Section: Datamentioning

confidence: 99%

Drivers of cross‐border bank claims: The role of foreign‐owned banks in emerging countries

Brana,

Chenaf‐Nicet,

Lahet

2023

World Economy

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Studies of the determinants of cross‐border bank claims are based on the economic situations of the lending and borrowing countries—the traditional push/pull factors—but fail to take into account the situation of the international lending banks and the presence of their subsidiaries in emerging countries. They also fail to explain the huge decrease in cross‐border bank flows after the 2008 global financial crisis. In this paper, we analyse the determinants of cross‐border bank claims on a panel of 28 emerging countries and explicitly integrate banking determinants. Thus, we account for the financial situation of international lender banks and the existence of foreign locations in emerging countries as a potential pull stabilising factor. We show that the presence of foreign banks in emerging countries is clearly a factor of attraction for cross‐border bank claims. It remains when we explicitly take into account the 2008 crisis but to a lower extent and in favour of interbank loans. This may be proof of support from the international parent banks to their affiliates. Last, the financial situation of international banks, notably their liquidity and ability to respect prudential rules, also plays a role in their financing strategies in emerging countries.

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Section: Datamentioning

confidence: 99%

Drivers of cross‐border bank claims: The role of foreign‐owned banks in emerging countries

Brana,

Chenaf‐Nicet,

Lahet

2023

World Economy

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“…At the dawn of transition, privatisation through asset sales to foreigners was forbidden or restricted by law, but it became predominant by the end of the 1990s, in particular in the banking sector. These banks were dramatically exposed to cross-border lending contagion in multinational banking (Derviz and Podpiera, 2011). Western competitors seriously felt the competitive pressure of these newly privatised firms, not strong in terms of profitability but from financial payoffs, and they were able to derive from assets acquired for free or peanuts.…”

Section: Basic Greedy Microeconomic Behaviour: Asset Grabbingmentioning

confidence: 99%

The unintended emergence of a greed-led economic system

Andreff

2019

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Purpose This paper aims to propose a new model of economic behaviour in which activities are led by greed rather than by the traditional formal rules of capitalism. Design/methodology/approach This paper relies on the empirical observation of bad practices that developed in synchrony during the collapse of the former communist economic system and the rise of global financial capitalism. Both were fuelled by greedy behaviour of asset grabbing, and paved the way to an emerging greed-led economic system. Findings First, microeconomic individual greedy behaviours that drive asset grabbing are identified, such as rigged or corrupt privatisation drives, subprime mortgage loans, Ponzi schemes, lending to insolvent clients, bad loan securitisation, stock options, fraudulent accounting and online betting on fixed matches. Then systematic changes in the traditional formal rules of capitalism that favour those having adopted a greedy strategy are pointed at; greedy behaviour is institutionalised when these capture the state and successfully lobby for rules change. Contrary to capitalism, systemic greed uses asset grabbing, instead of capital accumulation, as its major means for wealth maximisation without constraint, in a winner-take-all economy beneficial to oligarchs. Research limitations/implications The implications of this new systemic behaviour have implications for further economic modelling. Practical implications The emergence of systemic greed will have implications for the design of regulatory systems. Originality/value This paper proposes that a greed-controlled economy is replacing the traditional capitalist economy.

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“…The second strand of literature that our paper relates to is international financial contagion. The literature on this strand can be divided into studies focusing on financial sector linkages for the propagation of economic shock (Bekaert, Harvey, & Lundblad, 2005;Corsetti, Pericoli, & Sbracia, 2005;Derviz & Podpiera, 2007;Forbes & Rigobon, 2002;Jotikasthira, Lundblad, & Ramadorai, 2013) and others that focus on trade linkages (Eichengreen, Rose, & Wyplosz, 1996;Forbes, 2001Forbes, , 2004Claessens & Forbes, 2001;Forbes & Chinn, 2004;Blanchard, Dell'Ariccia, & Mauro, 2010). Forbes (2001) describes three channels through which an economic shock can be transmitted to other countries: a competitiveness effect, which has a negative effect on exports because of the adverse impact on relative competitiveness; an income effect, which also has a negative effect because of the adverse impact on income in the importing country and hence a reduction in demand for imports; and a cheap import effect, which has a positive effect because of the positive impact on relative competitiveness and hence an increase in demand for imports.…”

Section: Theoretical Background and Related Literaturementioning

confidence: 99%

Transmission of a global financial crisis shock to an emerging economy

2018

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Using a unique dataset consisting of all corporate loans in Pakistan, we study the impact of the global financial crisis (GFC) on the lending ability of its banking sector. We also take into account various bank and loan types along with extensive margins, firm size effects, and impact of information asymmetry. Our findings show that the Pakistani banking sector was indeed affected by the GFC as high exposure banks, who borrow relatively more internationally, reduce lending to local firms and this impact is larger for small firms. We also find differences in the lending ability of various bank types and loan types. By using direct information asymmetry measure, we find that banks reduced lending after the global financial crisis shock. However, the information gathered from the previous relationship of the borrower with relatively low exposure banks can overcome the negative financial shock and increase lending after the shock. These findings are very relevant in the context of the spillover effects of the GFC and have important policy implications for emerging markets.

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Cross‐Border Lending Contagion in Multinational Banks

Cited by 9 publications

References 16 publications

Drivers of cross‐border bank claims: The role of foreign‐owned banks in emerging countries

Drivers of cross‐border bank claims: The role of foreign‐owned banks in emerging countries

The unintended emergence of a greed-led economic system

Transmission of a global financial crisis shock to an emerging economy

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