Competition for internal funds within multinational banks: Foreign affiliate lending in the crisis

Arbeitspapier

We investigate how the lending activities of a multinational bank's affiliates located abroad are affected by funding difficulties in view of the financial crisis. For this, we consider transaction-induced changes in long-term lending to the private sector of 40 countries by the affiliates of the 68 largest German banks. We find that affiliates' local deposits and profitability have been stabilizing loan supply. By contrast, relying on short-term wholesale funding has increasingly proven to be a disadvantage in the crisis, as inter-bank and capital markets froze. Besides, the more an affiliate abroad takes recourse to intra-bank funding in the crisis, the more it becomes dependent on a stable deposit and long-term wholesale funding position of its parent bank. We furthermore detect competition for intra-bank funding across the affiliates abroad as well as an increasing focus on the parent bank's home market activities.

Object Details

• ISBN: 978-3-86558-832-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 19/2012

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Multinational Firms; International Business ; International Lending and Debt Problems ; Financial Markets and the Macroeconomy
• Subject: funding structure ; multinational banks ; internal capital market ; intra-bank lending ; wholesale funding ; financial crisis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Düwel, Cornelia ; Frey, Rainer
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/64814
• Last update: 10.03.2025, 11:42 AM CET