Resilience and Fragility in Global Banking: Impacts on Emerging Economies
Theory suggests both resilience and fragility in banking networks. This paper finds both, exploiting a new database of cross-border syndicated lending to developing countries from 1993 to 2017. Shocks propagate via co-lenders driven by central players, but shocks impacting fringe banks have little impact. The global financial crisis and the appearance of South-South lenders prompted a decline in network centrality, suggesting greater resilience to normal shocks. Multilateral Development Banks may play a catalytic role, but their small size limits their ability to mitigate shock propagation. The ongoing Covid-19 crisis is not a normal shock, is hitting central players and will likely provoke significant contagion.
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| Language: | English |
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Inter-American Development Bank
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| Subjects: | Development Bank, Financial Institution, Bank Crisis, Commercial Bank, Financial Stability, Global Financial Crisis, Syndicated Loan, F34 - International Lending and Debt Problems, L14 - Transactional Relationships • Contracts and Reputation • Networks, G21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages, Banks;Syndicate loans;Shock propagation;Systemic banking crises, |
| Online Access: | http://dx.doi.org/10.18235/0002504 https://publications.iadb.org/en/resilience-and-fragility-in-global-banking-impacts-on-emerging-economies |
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| Summary: | Theory suggests both resilience and fragility in banking networks. This paper finds both, exploiting a new database of cross-border syndicated lending to developing countries from 1993 to 2017. Shocks propagate via co-lenders driven by central players, but shocks impacting fringe banks have little impact. The global financial crisis and the appearance of South-South lenders prompted a decline in network centrality, suggesting greater resilience to normal shocks. Multilateral Development Banks may play a catalytic role, but their small size limits their ability to mitigate shock propagation. The ongoing Covid-19 crisis is not a normal shock, is hitting central players and will likely provoke significant contagion. |
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