The Cross-Market Spillover of Economic Shocks Through Multi-Market Banks

Berrospide, Jose M.; Black, Lamont K.; Keeton, William R.

doi:10.2139/ssrn.2023744

Cited by 4 publications

(5 citation statements)

References 55 publications

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“…They also consider securitization as a possible mitigating factor in this transmission. Similar to Berrospide et al (2011), this study uses the regional variation in real estate markets to identify the transmission, and the results of both papers are largely consistent. Nevertheless, this paper is the first international bank-level study focusing on alternative asset prices, namely real estate and stock market prices, and documenting the transmission in response to changes in those prices.…”

Section: Introductionmentioning

confidence: 60%

“…Next, we turn to securitization opportunities for parent banks at home country. The use of securitization may mitigate transmission as -at least theoretically-banks can get rid of some real estate exposure smoothen their capital base, and this is partially observed in the U.S. setting (Berrospide et al, 2011). Yet Acharya et al (2013) show that the risk is actually not transferred away from the banks, which provide explicit guarantees, and thus securitization may not be as effective.…”

Section: The Effects Of Information Securitization and Policy Responses On Transmissionmentioning

confidence: 99%

“…A positive shock in the parent country not only leads to more funds to parent banks (a positive impact on foreign subsidiaries' credit supply), which can be used in profitable subsidiaries and for diversification purposes (as banks may be cautious of following housing busts), but also more investment opportunities in home country, which in turn may soak up scarce capital from foreign subsidiaries (a negative impact). Following the Berrospide et al (2011) paper, we call the first channel the spillover effect and the latter one the substitution effect. Yet the magnitudes of the impact of alternative effects may be different in positive and negative shocks.…”

Section: Asymmetric Transmission In Good or Bad Timesmentioning

confidence: 99%

“…They find that this effect gets bigger with financial integration, which in turn increases economic volatility through higher variation in house prices and through strengthened links between the collateral and the overall economy. Berrospide et al (2011) relate the house prices and mortgage delinquencies in the U.S. during the 2007-2009 crisis to lending through multi-market banks, and document the cross-state transmission. They also consider securitization as a possible mitigating factor in this transmission.…”

Section: Introductionmentioning

confidence: 99%

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The Transmission of Real Estate Shocks Through Multinational Banks

Bertay

2014

SSRN Journal

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This paper investigates the credit supply of banks in response to domestic and foreign real estate price changes. Using a large international dataset of multinational banks, we find evidence of a significant transmission of domestic real estate shocks into lending abroad. A 1% decrease in real estate prices in home country, in particular, leads to a 0.2-0.3% decrease in credit growth in the foreign subsidiary. This response, however, is asymmetric: only negative house price changes are transmitted. Stricter regulation of activities of parent banks can reduce this effect, indicating a role for regulation in alleviating the transmission of real estate shocks. Further, the analysis of the impact of real estate shocks on foreign subsidiary funding indicates that shocks are transmitted through changes in long-term debt funding and equity.

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Section: Introductionmentioning

confidence: 60%

Section: The Effects Of Information Securitization and Policy Responses On Transmissionmentioning

confidence: 99%

Section: Asymmetric Transmission In Good or Bad Timesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The Transmission of Real Estate Shocks Through Multinational Banks

Bertay

2014

SSRN Journal

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Section: The Effects Of Information Securitization and Policy Respons...mentioning

confidence: 99%

The Transmission of Real Estate Shocks Through Multinational Banks

Bertay

2024

Preprint

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Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?

Haas¹,

Lelyveld²

2014

J of Money Credit Banking

275

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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 in particular 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 crisis episodes, they also increase the risk of 'importing' instability from abroad.

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The Cross-Market Spillover of Economic Shocks Through Multi-Market Banks

Cited by 4 publications

References 55 publications

The Transmission of Real Estate Shocks Through Multinational Banks

The Transmission of Real Estate Shocks Through Multinational Banks

The Transmission of Real Estate Shocks Through Multinational Banks

Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?

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