Liberty Street Economics authors ask whether, based on precedent, global banks are likely to provide additional support to the economic recovery following COVID-19 in the locations they serve.
he recent financial crisis underscored the importance of understanding how liquidity conditions for banks (or other financial institutions) influence the banks’ lending to domestic and foreign customers.
Over the past thirty years, the typical large bank has become a global entity with subsidiaries in many countries.
In this post, I focus on the broad historical progression of international banking activity.
As financial markets have become increasingly globalized, banks have developed growing networks of branches and subsidiaries in foreign countries. This expansion of banking across borders is changing the way banks manage their balance sheets, and the ways home markets and foreign markets respond to disturbances to financial markets. Based on our recent research, this post shows how global banks used their foreign affiliates for accessing scarce dollars during the financial crisis—a liquidity strategy that helped transmit shocks internationally while reducing some of the consequences in the stressed locations.