The Internal Organization of Banks and the Transmission of Lending Shocks across Borders

Project Start:06/2013
Status:Completed
Researchers:
Category: Financial Intermediation, Systemic Risk Lab
Funded by:LOEWE

The internal functions of banks could be decisive factors in the transmission of shocks both across a country's regions and internationally. This project examines the influence of the integration of important internal bank processes on the transmission of financial shocks between parents and subsidiaries.

For cleaner identification of the effects of parent bank shocks on subsidiary credit supply, we concentrate on two types of negative events for parents: solvency shocks (large decline in the capital of the parent bank) and wholesale shocks (a drop in wholesale funding). The approach is based on evidence from talks to industry representatives.

The work continues with a second part by establishing a link between the integration of bank processes and the transmission of shocks and examining the effect of corporate culture on the transmission of solvency and wholesale shocks. The contribution of the second part of the project is significant on several accounts. First, we are the first to extract measures for bank integration/centralization based on corporate language/culture. Second, we will be the first to relate the thus defined measure for bank integration to the transmission of solvency and liquidity shocks within and across borders. Third, we will be the first to examine the influence of social centralization on bank integration and hence on the transmission of lending shocks.

Related Working Papers

No.Author/sTitleYearProgram AreaKeywords
175Reint Gropp, Deyan RadevInternational Banking Conglomerates and the Transmission of Lending Shocks Across Borders2017 Financial Intermediation, Systemic Risk Lab Commercial banks, global banks, wholesale shocks, solvency shocks, transmission, internal capital markets
174Reint Gropp, Deyan RadevSocial Centralization, Bank Integration and the Transmission of Lending Shocks2017 Financial Intermediation, Systemic Risk Lab Global banks, social centralization, bank integration, shocks, transmission
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