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Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?

Authors

  • RALPH DE HAAS,

  • IMAN VAN LELYVELD


  • The authors thank Thorsten Beck, Erik Berglöf, Martin Brown, Hans Degryse, Sebnem Kalemli-Ozcan, Luc Laeven, Hyun Song Shin, Jeromin Zettelmeyer, an anonymous referee, and participants at the EBRD-G20-RBWC Conference on Cross-Border Banking in Emerging Markets, the DNB-European Banking Center-JMCB-University of Kansas Post-Crisis Banking Conference, the 27th Congress of the European Economic Association, and seminars at the DNB, EBRD, Maastricht University, Higher School of Economics (Moscow), and University of Surrey for useful comments. The views expressed in this paper are those of the authors and not necessarily of the institutions they are affiliated with.

Abstract

We use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the Great Recession with lending by a benchmark of 202 domestic banks. Contrary to earlier and more contained crises, parent banks were not a significant source of strength to their subsidiaries during 2008–09. When controlling for other bank characteristics, multinational bank subsidiaries had to slow down credit growth almost three times as fast as domestic banks. This was in particular the case for subsidiaries of banking groups that relied more on wholesale funding.

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