nep-ifn New Economics Papers
on International Finance
Issue of 2014‒09‒25
one paper chosen by
Vimal Balasubramaniam
University of Oxford

  1. Financial crises and the composition of cross-border lending By Cerutti, Eugenio; Hale, Galina; Minoiu, Camelia

  1. By: Cerutti, Eugenio (International Monetary Fund); Hale, Galina (Federal Reserve Bank of San Francisco); Minoiu, Camelia (International Monetary Fund)
    Abstract: We examine the composition and drivers of cross-border bank lending between 1995 and 2012, distinguishing between syndicated and non-syndicated loans. We show that on-balance sheet syndicated loan exposures, which account for almost one third of total cross-border loan exposures, increased during the global financial crisis due to large drawdowns on credit lines extended before the crisis. Our empirical analysis of the drivers of cross-border loan exposures in a large bilateral dataset leads to three main results. First, banks with lower levels of capital favor syndicated over other kinds of cross-border loans. Second, borrower country characteristics such as level of development, economic size, and capital account openness, are less important in driving syndicated than non-syndicated loan activity, suggesting a diversification motive for syndication. Third, information asymmetries between lender and borrower countries became more binding for both types of cross-border lending activity during the recent crisis.
    Keywords: cross-border banking; syndicated loans; global financial crisis; BIS international banking statistics; Dealogic Loan Analytics
    JEL: F30 G15
    Date: 2014–08–29

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