Are Foreign Banks a 'Safe Haven'? Evidence from Past Banking Crises
IMF Working Papers, February 26, 2015
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- Are Foreign Banks a 'Safe Haven'? Evidence from Past Banking Crises
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Bibliographic details
- Authors: Gustavo Adler, Eugenio M Cerutti
- Published: February 26, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781616357047.001
Research question and scope
- Focus: depositor behavior (liability side) vis-à-vis foreign banks during banking crises.
- Empirical setting: banking crises in Argentina and Uruguay over the period 1994-2002.
- Core questions:
- Are foreign banks perceived as a safe haven during bank runs?
- Does legal structure (branch versus subsidiary) matter?
- Do perceptions depend on the nature of the crisis?
Data and methods (as described)
- Data source: episodes of banking crises in Argentina and Uruguay, 1994-2002.
- Unit of analysis: depositors’ behavior and deposit flows across domestic, foreign-branch, and foreign-subsidiary banks.
- Episodes analyzed: five bank run episodes (explicit count provided in summary).
Key findings
- The commonly held view that foreign banks play a stabilizing role during domestic banking crises is not supported by robust evidence in this study.
- Empirical result on safe-haven perceptions:
- Only in one (large) bank run episode, out of five studied, is there evidence of safe haven perceptions towards foreign branches.
- No broad or consistent pattern across episodes that foreign banks systematically attract depositor flight during crises.
Policy-relevant implications (derived from findings)
- Policymakers should not assume foreign bank presence automatically provides depositor stability during domestic banking crises.
- Legal structure (branch versus subsidiary) can matter in specific episodes, but evidence of systematic safe-haven effects is limited.
- Crisis preparedness and depositor protection measures should be designed without relying on a presumed stabilizing role of foreign banks.
Publication and metadata (as provided)
- Authors: Gustavo Adler, Eugenio M Cerutti
- Date: February 26, 2015
- Pages: 27
- Volume: 2015
- Issue: 043
- Series: Working Paper No. 2015/043
- Stock No: WPIEA2015043
- DOI: https://doi.org/10.5089/9781616357047.001
- ISBN: 9781616357047
- ISSN: 1018-5941
- Subjects and keywords: Bank deposits, Banking, Commercial banks, Exchange rate risk, Financial institutions, Financial regulation and supervision, Financial services, Foreign banks, State-owned banks; Keywords include bank run, deposit loss, deposit withdrawal, depositor base, non-resident deposit, WP.
Source: IMF Working Paper "Are Foreign Banks a 'Safe Haven'? Evidence from Past Banking Crises" by Gustavo Adler and Eugenio M Cerutti (February 26, 2015).