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2019 | OriginalPaper | Chapter

6. Global Banking

Authors : Andrada Bilan, Hans Degryse, Kuchulain O’Flynn, Steven Ongena

Published in: Banking and Financial Markets

Publisher: Springer International Publishing

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Abstract

In this chapter, we review the literature that seeks to uncover the consequences of the integration of the global banking system. We begin by proving a detailed description of the main concepts in the global banking literature and the different channels through which economic shocks are transmitted. Next, we review how the integration of the banking system affects borrowing constraints, loan rates, and economic output. Further, we review the literature that seeks to uncover why and how banks establish branches and subsidiaries in foreign countries. We then review the literature on the effects of the assets of a local bank’s foreign affiliates on their sensitivity to local funding shocks? We continue by discussing how monetary policy is transmitted across boarders, both inward and outward transmission. Finally, we discuss how global banking interacts with macroprudential policy.

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Footnotes
1
See Jiménez et al. (2012) for the use of loan application data in identifying the bank balance sheet channel of monetary policy transmission.
 
2
These countries are Austria, the Czech Republic, Belgium, France, Germany, Ireland, Italy, Lithuania, Latvia, Malta, Portugal, Romania, Slovenia, Slovakia, and Spain.
 
3
Cerutti (2015) notes two criticisms of these datasets. Firstly, the level of borrow country credit exposures is often overstated due to the use of balance sheets claims as they do not represent the parent bank’s legal exposure. Cerutti (2015) argues that this would be better represented by the capital incorporated in the subsidiaries of the borrowing countries. Secondly, subsidiaries in borrower countries funding models are often dominated by local residents’ deposits and are thus not necessarily dependent on parent bank/foreign funding sources.
 
4
Aggregated bank or country-level data also suffers from this vulnerability, as lending to large firms drives aggregate loan volumes.
 
5
They combine the bank-ownership database compiled by Claessens and van Horen (2014), bank funding data using Dealogic, bank balance sheet information from Bankscope, firm balance sheet information from Amadeus, and bank-firm connection information from Kompass. Note: Bureau van Dijk’s Bankscope has been replaced by Moody’s Analytics BankFocus.
 
6
The python code used to estimate the shadow rate in Krippner (2016) is available at: www.​github.​com/​as4456/​Leo_​Krippner_​SSR.
 
7
See Cerutti et al. (2017) for a detailed description of the database.
 
8
The use of this fixed effect specification, in the global banking literature, often includes the country-time effects, or explicit controls for macro-effects at country level, for example GDP growth rates.
 
9
See Ehrmann et al. (2001) for an early use of these estimators in the traditional bank lending channel literature.
 
10
For example, banks may be large due to experiencing high loan growth.
 
11
The International Banking Research Network is a group of researchers from central banks and institutions from around the world. The network conducts coordinated research on issues related to global banks and their activities internationally.
 
12
These countries include Austria, Canada, Chile, France, Germany, Hong Kong, Ireland, Italy, the Netherlands, Poland, Portugal, Russia, South Korea, Spain, Switzerland, the UK, and the US.
 
13
The papers that contributed to this study are: Argimon et al. (2019); Auer et al. (2019); Avdjiev et al. (2018); Barbosa et al. (2018); Gajewski et al. (2019); Gräb and Żochowski (2017); Hills et al. (2019); Kruglova and Styrin (2018); Lindner et al. (2019); Schmidt et al. (2018).
 
14
The following countries participated in the inward transmission analysis: Austria, Chile, France, Germany, Hong Kong, Ireland, Italy, Portugal, South Korea, Switzerland, and the UK. Outward transmission analysis was conducted by teams from Canada, Germany, the Netherlands, Spain, and the US.
 
15
Examples of such policies include limits on loan-to-value ratios, debt-to-income ratios, credit growth, as well as reserve and capital requirements. See Claessens et al. (2013) for a detailed discussion of the different macroprudential policies.
 
16
These countries are Canada, Chile, France, Germany, Hong Kong, Italy, Mexico, the Netherlands, Poland, Portugal, South Korea, Switzerland, Turkey, the UK, and the US. The two international organizations are the Bank for International Settlements and the European Central Bank.
 
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Metadata
Title
Global Banking
Authors
Andrada Bilan
Hans Degryse
Kuchulain O’Flynn
Steven Ongena
Copyright Year
2019
Book
Banking and Financial Markets

Print ISBN: 978-3-030-26843-5

Electronic ISBN: 978-3-030-26844-2

Copyright Year: 2019

DOI
https://doi.org/10.1007/978-3-030-26844-2_6