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Foreign banks as shock absorbers in the financial crisis? National Bank of Belgium Working Paper No. 322

Barboni, Giorgia (2017) Foreign banks as shock absorbers in the financial crisis? National Bank of Belgium Working Paper No. 322. [Working Paper]

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    This paper finds that foreign banks can act as a buffer against negative credit supply shocks, in contexts where the domestic credit market is heavily hit by a country-specific adverse shock. A new dataset is constructed, which combines Belgian Credit Register data with firms and banks’ balance sheets. After 2008, Belgian firms borrowing from domestic banks experienced a stronger credit contraction (minus 1.8 percentage points) than firms borrowing from foreign banks. Also, foreign banks “cherry-picked” new relationships with more profitable firms to a higher extent during the crisis, and turned down existing relationships more frequently than domestic banks. Results from this paper suggest that foreign banks can mitigate negative financial shocks in countries where domestic financial intermediaries unexpectedly experienced the consequences of the financial crisis to a higher extent.

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    Item Type: Working Paper
    Uncontrolled Keywords: Foreign banks, Financial Crisis, Credit Supply
    Subjects for non-EU documents: Countries > Belgium
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on/reforms/economic governance
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National Bank of Belgium (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 29 Nov 2019 16:34
    Number of Pages: 39
    Last Modified: 29 Nov 2019 16:34

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