International Banking and Liquidity Risk Transmission: Lessons from the United Kingdom

Hills, Bob; Hooley, John; Korniyenko, Yevgeniya; Wieladek, Tomasz

doi:10.2139/ssrn.2687991

Cited by 9 publications

(11 citation statements)

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“…This means that parent banks tend to shift their lending to their foreign affiliates after the tightening of home locational prudential measures, speaking for cross-border leakages from these instruments. The finding for LTV cap is consistent with Bonfim and Costa (2017) and Hills et al (2017), who find that foreign banks operating in Portugal and the UK, respectively, increase credit after the tightening of LTV ratios abroad. The same result is also in line with Berrospide et al (2017), who also, consistently with our results, find that tightening of local reserve requirements leads to an increase in lending growth by foreign banks operating in the US.…”

Section: Resultssupporting

confidence: 88%

“…In line with our result for LTV cap, also in the context of the IBRN initiative, Ohls et al (2017) find that German banks increase domestic lending in response to the tightening of foreign LTV regulation. Concerning the LTV cap spillover to foreign banks, Hills et al (2017) find the same direction of the spillover as in our and Portuguese study, while spillovers from capital regulation to UK banks seems insignificant. Our findings are also in line with Berrospide et al (2017), who find that a foreign country's tightening of limits on LTV ratios increases lending growth in ECB Working Paper Series No 2285 / May 2019 the US.…”

Section: Related Literaturesupporting

confidence: 86%

“…The latter allows us to rule out a potential contamination of our results with interbank lending (from parents to affiliates). We also vary the weighting scheme and consider a baseline dynamic form, a static form and, similarly to Hills et al (2017), the one based on a four-quarter Furthermore, in order to highlight differences in the transmission channels, we run also all regressions using loans to financial companies (F ) and loans to non-financial companies (N F ) as dependent variables.…”

Section: Robustness Checksmentioning

confidence: 99%

See 2 more Smart Citations

Cross-border effects of prudential regulation: Evidence from the euro area

Franch

Nocciola

Żochowski

2021

Journal of Financial Stability

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Section: Resultssupporting

confidence: 88%

Section: Related Literaturesupporting

confidence: 86%

Section: Robustness Checksmentioning

confidence: 99%

See 1 more Smart Citation

Cross-border effects of prudential regulation: Evidence from the euro area

Franch

Nocciola

Żochowski

2021

Journal of Financial Stability

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“…Alongside this, a sizable literature has amassed studying the international spillover effects of prudential policies (e.g. Aiyar, Calomiris, Hooley, Korniyenko, and Wieladek, 2014;Berrospide, Correa, Goldberg, and Niepmann, 2017;Buch and Goldberg, 2017;Hills, Reinhardt, Sowerbutts, and Wieladek, 2017) and their potential unintended consequences (e.g. Ahnert, Forbes, Friedrich, and Reinhardt, 2018).…”

Section: Introductionmentioning

confidence: 99%

In the Face of Spillovers: Prudential Policies in Emerging Economies

Coman

Lloyd

2019

SSRN Journal

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We examine whether emerging market prudential policies offset the macro-financial spillover effects of US monetary policy. We find that emerging markets with tighter overall prudential policy face significantly smaller, and less negative, spillovers to total credit from US monetary policy tightening shocks. Loan-to-value ratio limits and reserve requirements appear to be particularly effective prudential tools at mitigating the spillover effects of US monetary policy. Our findings indicate that prudential policies can dampen emerging markets' exposure to US monetary policy and the associated global financial cycle, suggesting they may be a useful tool in the face of international macroeconomic policy trade-offs.

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“…Walter Bagehot, a renowned nineteenth-century economist, once stated that "the characteristic danger of great nations is that they may at last fail from not comprehending the great institutions they have created " (Houpt, 1999). In recent years banks have become so large and more complex, offering multiple services and products through operations spanning the globe, that it is sometimes challenging to identify on which side of banks' balance sheets vulnerabilities might emerge, or assess how vulnerabilities in one part of the financial system might affect other parts (Auer et al, 2017;Baskaya et al, 2017;Bonfim et al, 2017;Caccavaio et al, 2017;Hills et al, 2017). The great financial crisis of 2008 revealed major shortcomings in focusing global banks' risk management efforts at the country level and neglecting sectors, thereby pointing out critical gaps in the available data for monitoring and responding to financial risks to economic stability (Cetorelli and Goldberg, 2009;Sedunov, 2016).…”

Section: Introductionmentioning

confidence: 99%

Relative Contribution of Public Sector, Banking Sector, and Non-Bank Financial Sector Claims in U.S. Global Banks' Exposure to Foreign Counterparties' Default Risks

Niankara¹,

Ismail²

2018

Preprint

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This paper relies on accounting-based measures of country risk to investigate U.S. global banks' exposure to foreign country risk over the 2017 fiscal year as measured by the sum of cross-border risk, foreign office risk, and derivative risk claims. We achieve this using panel linear modeling methods with country level heterogeneity and time fixed effects, along with a constructed panel data of 284 observations on 71 countries distributed across 6 world regional blocks, and observed over 4 consecutive quarters starting from 4th quarter 2016 and ending with 3rd quarter 2017. The results show that on average, over the four quarters, a 1% increase in foreign banking sector's claims significantly increases U.S. global banks cross border risk exposure by 0.34%, while reducing derivative risk exposure by 0.22%, but have no significant impact on foreign office risk exposure. Similar results are observed with public sector claims which significantly increase banks' exposure to cross border risk by 0.21%, while reducing derivative risk exposure by 0.19%. Conversely however, non-bank financial sector claims are found to have no significant affect on cross-border risk exposure, but significantly reduce foreign office risk exposure by 0.09%, while increasing derivative risk exposure by 0.06%. These results indicate the presence of sectoral heterogeneities in U.S. banks' exposure to foreign counterparties' risk, and also that overall, over the course of 2017 the level of U.S. global banks' cross-border risk exposure increased, while their level of derivative risk exposure decreased, and the level of foreign office risk exposure remained relatively unchanged.

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International Banking and Liquidity Risk Transmission: Lessons from the United Kingdom

Cited by 9 publications

References 0 publications

Cross-border effects of prudential regulation: Evidence from the euro area

Cross-border effects of prudential regulation: Evidence from the euro area

In the Face of Spillovers: Prudential Policies in Emerging Economies

Relative Contribution of Public Sector, Banking Sector, and Non-Bank Financial Sector Claims in U.S. Global Banks' Exposure to Foreign Counterparties' Default Risks

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