| Abstract: |
Activities of international banks have been at the core of discussions on the
causes and effects of the international financial crisis. Yet we know little
about the actual magnitudes and mechanisms for transmission of liquidity
shocks through international banks, including the reasons for heterogeneity in
transmission across banks. The International Banking Research Network,
established in 2012, brings together researchers from around the world with
access to micro-level data on individual banks to analyze issues pertaining to
global banks. This paper summarizes the common methodology and results of
empirical studies conducted in eleven countries to explore liquidity risk
transmission. Among the main results is, first, that explanatory power of the
empirical model is higher for domestic lending than for international lending.
Second, how liquidity risk affects bank lending depends on whether the banks
are drawing on official-sector liquidity facilities. Third, liquidity
management across global banks can be important for liquidity risk
transmission into lending. Fourth, there is substantial heterogeneity in the
balance sheet characteristics that affect banks’ responses to liquidity risk.
Overall, balance sheet characteristics of banks matter for differentiating
their lending responses, mainly in the realm of cross-border lending. |