Arbeitspapier
Repo funding and internal capital markets in the financial crisis
This paper examines how the exposure of German parent banks to the disruptions on sale and repurchase markets (repo markets) during the financial crisis has affected their provision of funds to their foreign branches and subsidiaries via bank-internal capital markets. The collapse of the subprime market, the rescue of Bear Stearns and the bankruptcy of Lehman Brothers are analyzed with regard to their role as amplifiers of uncertainty about the value of collateral used in repo transactions and mistrust among market participants. The results show that parent banks which were more exposed to these disruptions were more likely to withdraw bank-internal funds from their branches and subsidiaries located abroad. Among the three events, the rescue of Bear Stearns triggered the largest contraction on internal capital markets from the part of the parent bank, possibly because this event demonstrated for the first time the fragility of even very large financial institutions. After the subprime market collapse, branches were briefly more protected as core investment locations, while subsidiaries were used as core funding locations up to the Lehman Brothers bankruptcy. All in all, funding via repo markets is found to be one channel that transmitted shocks primarily related to the US financial system abroad.
- ISBN
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978-3-86558-914-9
- Language
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Englisch
- Bibliographic citation
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Series: Bundesbank Discussion Paper ; No. 16/2013
- Classification
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Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
International Financial Markets
International Lending and Debt Problems
Financial Markets and the Macroeconomy
- Subject
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repo
funding structure
multinational banks
internal capital market
intra-bank lending
financial crisis
- Event
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Geistige Schöpfung
- (who)
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Düwel, Cornelia
- Event
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Veröffentlichung
- (who)
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Deutsche Bundesbank
- (where)
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Frankfurt a. M.
- (when)
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2013
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Düwel, Cornelia
- Deutsche Bundesbank
Time of origin
- 2013
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Contingent convertible bonds and the stability of bank funding: The case of partial writedown
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System-wide and banks' internal stress tests : regulatory requirements and literature review
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Carry funding and safe haven currencies: A threshold regression approach
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Informationsprospekt der Deutschen Bundesbank über die Möglichkeiten der Erkennung von Falschgeld
Bundesrepublik, Banknotentransportverpackung (Muster) für 200-DM-Scheine (4.000.000 DM)
Competition for internal funds within multinational banks: Foreign affiliate lending in the crisis
How central is central counterparty clearing? A deep dive into a European repo market during the crisis
Uncertainty and bank wholesale funding
Contingent convertible bonds and the stability of bank funding: The case of partial writedown
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System-wide and banks' internal stress tests : regulatory requirements and literature review
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Informationsprospekt der Deutschen Bundesbank über die Möglichkeiten der Erkennung von Falschgeld