The Mix of International Banks’ Foreign Claims : Determinants and Implications

The Mix of International Banks’ Foreign Claims : Determinants and Implications

The authors analyze the determinants and implications for financial stability of the mix of international banks' claims countries receive. In particular, they distinguish between local claims, extended by international banks through their affiliates in a host (or claim recipient) country, and cross-border claims, booked from outside the host country, typically from banks' headquarters in their home countries. Using data on U.S., Spanish, and Italian banks' foreign claims across countries, the authors find that the share of local foreign claims is primarily driven by the degree of "freedom" in the host banking sector and by business opportunities in the local market. Entry requirements, startup and informational costs associated with international banking also play a role, but their influence is less robust. Finally, they find that the mix of international bank claims has implications for financial stability, since foreign claim volatility is lower in countries that receive a larger share of local claims.

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Bibliographic Details
Main Authors: Herrero, Alicia García, Martínez Pería, Maria Soledad
Language:English
Published: World Bank, Washington, DC 2005-10
Subjects:AFFILIATE, AFFILIATES, AGENTS, APPLICATIONS, BALANCE OF PAYMENTS, BANK CAPITAL, BANK OF SPAIN, BANK PROFITS, BANKING CRISIS, BANKING SECTOR, BORROWING, CAPITAL CONTROLS, CAPITAL FLOWS, CAPITAL REQUIREMENT, CAPITAL REQUIREMENTS, CENTRAL BANKS, CORPORATE INCOME TAXES, DEBT, DEBT SECURITIES, DEFAULT RISK, ECONOMIC CONDITIONS, ECONOMIC GROWTH, EMERGING ECONOMIES, EMPIRICAL ANALYSIS, FINANCIAL ASSETS, FINANCIAL INFORMATION, FINANCIAL INTEGRATION, FINANCIAL INTERMEDIATION, FINANCIAL SECTOR DEVELOPMENT, FINANCIAL SERVICES, FINANCIAL STABILITY, FINANCIAL SYSTEMS, FIXED COSTS, FOREIGN BANKS, FOREIGN ENTRY, GLOBALIZATION, GOVERNMENT INTERVENTION, INFLATION, INFORMATION COSTS, INTERNATIONAL BANKING, INTERNATIONAL BANKS, LATIN AMERICAN, LAWS, LENDING BEHAVIOR, PRICE RISK, RATES, SAVINGS, SECURITIES, SHAREHOLDERS, SUBSIDIARIES, SUPERVISORY AUTHORITIES, TAXATION, TRANSPORT, VOLATILITY,
Online Access:http://documents.worldbank.org/curated/en/2005/10/6350149/mix-international-banks-foreign-claims-determinants-implications
https://hdl.handle.net/10986/8475
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Summary:The authors analyze the determinants and implications for financial stability of the mix of international banks' claims countries receive. In particular, they distinguish between local claims, extended by international banks through their affiliates in a host (or claim recipient) country, and cross-border claims, booked from outside the host country, typically from banks' headquarters in their home countries. Using data on U.S., Spanish, and Italian banks' foreign claims across countries, the authors find that the share of local foreign claims is primarily driven by the degree of "freedom" in the host banking sector and by business opportunities in the local market. Entry requirements, startup and informational costs associated with international banking also play a role, but their influence is less robust. Finally, they find that the mix of international bank claims has implications for financial stability, since foreign claim volatility is lower in countries that receive a larger share of local claims.

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