Real and Financial Vulnerabilities from Crossborder Banking Linkages

July 25, 2014

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Format: Chicago

Kyunghun Kim, and Srobona Mitra. Real and Financial Vulnerabilities from Crossborder Banking Linkages, (USA: International Monetary Fund, 2014) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper looks at the vulnerabilities stemming from banking sector linkages between countries and their macroeconomic effects. It finds that credit risks (from a banking system’s claims on other countries) and funding risks (from a banking system’s liabilities to another) have declined over the past five years. It also finds that funding vulnerabilities have real effects. During normal times, funding vulnerabilities are associated with significant positive GDP growth surprises. During crisis times, funding vulnerabilities are associated with significant negative GDP growth surprises. The results tell us that policymakers should pay more attention to understanding crossborder funding risks.

Subject: Banking, Commercial banks, Countercyclical capital buffers, Credit, Credit risk, Financial institutions, Financial regulation and supervision, Foreign currency exposure, Money

Keywords: Banking, Banking system, Banking system fail, Capital, Capital depletion, Commercial banks, Countercyclical capital buffers, Counterparty banking systems, Credit, Credit risk, Credit Risks, Creditor banking systems, Foreign currency exposure, Funding index, Funding risk, Funding Risks, Funding shock, Funding vulnerability, GDP, GDP surprises, Global, Growth surprise, Network Linkages, Vulnerabilities from crossborder network linkage, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/136
Stock No:

WPIEA2014136
ISBN:

9781498369060
ISSN:

1018-5941

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