Banks’ Foreign Credit Exposures and Borrowers’ Rollover Risks Measurement, Evolution and Determinants

January 11, 2013

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Eugenio M Cerutti. Banks’ Foreign Credit Exposures and Borrowers’ Rollover Risks Measurement, Evolution and Determinants, (USA: International Monetary Fund, 2013) accessed November 23, 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

The recent crises highlighted the role of cross-border banking linkages. This paper proposes two new measures for better capturing creditor banking systems’ foreign credit exposures and borrower countries’ reliance on foreign bank credit, by combining BIS data with bank-level data. The results indicate that the proposed refinements matter, especially when foreign bank affiliates’ funding relies heavily on local deposits. In addition, after developing novel and necessary break-in-series and exchange rate variation adjustments, estimations looking at the driving factors of both measures during 2006-2012 highlight: (i) the role of systemic banking crises and global financial conditions in the evolution of banks’ foreign credit exposures; (ii) the role of a larger set of factors in the case of the evolution of borrower countries’ reliance on foreign bank credit—how countries borrowed, from whom they borrowed, and global financial and domestic demand conditions.

Subject: Banking, Commercial banks, Financial crises, Financial institutions, Foreign banks, Foreign currency exposure, Money, Systemic crises

Keywords: Banking group, Banking system, BIS bank, Borrower country, Commercial banks, Contagion, Credit commitment, Creditor banking system, Downstream exposure, Europe, Exchange rate, Foreign banks, Foreign currency exposure, Global, International, On-balance sheet, Systemic crises, Systemic risks, Upstream exposure, Vulnerabilities, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/009
Stock No:

WPIEA2013009
ISBN:

9781475544602
ISSN:

1018-5941

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