Crisis Transmission in the Global Banking Network
IMF Working Papers, April 12, 2016
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- Crisis Transmission in the Global Banking Network
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Bibliographic details
- Authors: Galina Hale, Tümer Kapan, Camelia Minoiu
- Published: April 12, 2016
- Series: IMF Working Papers
Overview and metadata
- Title: Crisis Transmission in the Global Banking Network
- Authors: Galina Hale, Tümer Kapan, Camelia Minoiu
- Date: April 12, 2016
- Series: Working Paper No. 2016/091
- Issue: 091
- Volume: 2016
- Pages: 38
- ISBN: 9781475551341
- ISSN: 1018-5941
Research question and data
- Objective: Study the transmission of financial sector shocks across borders through international bank connections.
- Data:
- long-term interbank loans among more than 6,000 banks
- sample period: 1997-2012
- constructed a yearly global network of interbank exposures
Methodology
- Exposure types analyzed:
- direct (first-degree) exposures
- indirect (second-degree) exposures
- Outcomes examined:
- bank profitability (returns)
- loan supply (domestic and cross-border)
Key findings
- Direct exposures to crisis countries:
- "squeeze banks' profit margins, thereby reducing their returns."
- Indirect exposures:
- indirect exposures to crisis countries enhance the negative effect on profitability.
- indirect exposures to non-crisis countries mitigate the negative effect on profitability.
- Real (real-economy) effects:
- crisis exposures reduce banks' supply of domestic loans.
- crisis exposures reduce banks' supply of cross-border loans.
- General conclusion:
- Results, based on a large global sample, support the notion that interconnected financial systems facilitate shock transmission.
Subject classification and keywords
- Subject: Bank credit, Banking, Banking crises, Financial crises, Financial institutions, Foreign currency exposure, Loans, Money, Syndicated loans, Systemic crises
- Keywords: balance sheet, bank level, bank performance, bank type, Banking crises, commercial bank, crisis exposure, financial networks, Foreign currency exposure, Global, Loans, long-term interbank exposures, return on assets, shock transmission, syndicated loan, syndicated loans, systemic banking crises, Systemic crises, WP
Italic: Content derived from IMF Working Paper "Crisis Transmission in the Global Banking Network" (Working Paper No. 2016/091) by Galina Hale, Tümer Kapan, and Camelia Minoiu, April 12, 2016.