Financial Crises and the Composition of Cross-Border Lending

By Eugenio M Cerutti, Galina Hale, Camelia Minoiu

October 16, 2014

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Eugenio M Cerutti, Galina Hale, and Camelia Minoiu. Financial Crises and the Composition of Cross-Border Lending, (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

We examine the composition and drivers of cross-border bank lending between 1995 and 2012, distinguishing between syndicated and non-syndicated loans. We show that on-balance sheet syndicated loan exposures account for almost one third of total cross-border loan exposures during this period. Furthermore, syndicated loan exposures increased during the global financial crisis due to large drawdowns on credit lines extended before the crisis. Our empirical analysis of the drivers of cross-border loan exposures in a large bilateral dataset shows three main results. First, banks with lower levels of capital favor syndicated over other kinds of cross-border loans. Second, borrower country characteristics such as level of development, economic size, and capital account openness, are less important in driving syndicated than non-syndicated loan activity, suggesting a diversification motive for syndication. Third, information asymmetries between lender and borrower countries, which are important both in normal and crisis times, became more binding for both types of cross-border lending activity during the recent crisis.

Subject: Bank credit, Banking, Cross-border banking, Financial institutions, Financial services, Lines of credit, Loans, Money, Syndicated loans

Keywords: Bank assets, Bank credit, Bank loan, Banking system, BIS international banking statistics, Borrower country, Capital account, Cross-border banking, Dealogic Loan Analytics, EME borrower, Global, Global financial crisis, Lines of credit, Loan claim, Loan exposure, Loan syndication market, Loans, Syndicated loans, Syndicated loans, WP

Publication Details

Pages:

59
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/185
Stock No:

WPIEA2014185
ISBN:

9781484361443
ISSN:

1018-5941

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