Foreign Bank Subsidiaries’ Default Risk during the Global Crisis: What Factors Help Insulate Affiliates from their Parents?
IMF Working Papers, June 8, 2016
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Bibliographic details
- Authors: Deniz Anginer, Eugenio M Cerutti
- Published: June 8, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484382189.001
Summary of study and objective
- Examines the association between the default risk of foreign bank subsidiaries in developing countries and their parents during the global financial crisis.
- Purpose: determine the size and sign of the correlation between parent banks’ and foreign subsidiaries’ default risk and identify factors that help insulate affiliates from their parents.
Key findings
- There is a significant and robust positive correlation between parent banks’ and foreign subsidiaries’ default risk.
- The correlation is lower for subsidiaries with:
- a higher share of retail deposit funding.
- more independent management from their parents.
- Host country bank regulations affect the extent to which shocks to parents influence subsidiaries’ default risk:
- The correlation between subsidiaries’ and parents’ default risk is lower for subsidiaries operating in countries that impose higher capital, reserve, provisioning, and disclosure requirements.
- Tougher restrictions on bank activities in host countries are associated with a lower parent–subsidiary default risk correlation.
Subjects and keywords (topics covered)
- Subjects: Bank regulation, Bank supervision, Banking, Debt default, External debt, Financial institutions, Financial markets, Financial regulation and supervision, Foreign banks, Stock markets
- Keywords: asset value, Banco Continental-BBVA Banco Continental, Bank regulation, bank subsidiaries, Bank supervision, Banking crises, BNP Paribas, Debt default, default risk, distance to default, Foreign banks, Global, host country bank regulation, Merton distance, Merton model, parent bank, ring-fencing, solvency deterioration, Stock markets, WP
Publication and metadata
- Authors: Deniz Anginer, Eugenio M Cerutti
- Date: June 8, 2016
- Series: Working Paper No. 2016/109
- Issue: 109
- Volume: 2016
- Pages: 31
- DOI: https://doi.org/10.5089/9781484382189.001
- ISBN: 9781484382189
- ISSN: 1018-5941
- Citation format example provided (Chicago): Deniz Anginer, and Eugenio M Cerutti. "Foreign Bank Subsidiaries’ Default Risk during the Global Crisis: What Factors Help Insulate Affiliates from their Parents?", IMF Working Papers 2016, 109 (2016), accessed 9/17/2026, https://doi.org/10.5089/9781484382189.001
IMF Working Paper No. 2016/109, authors Deniz Anginer and Eugenio M Cerutti.