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Title:Competition for internal funds within multinational banks: Foreign affiliate lending in the crisis PDF Logo
Authors:Düwel, Cornelia
Frey, Rainer
Issue Date:2012
Series/Report no.:Discussion Paper, Deutsche Bundesbank 19/2012
Abstract: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.
Subjects:funding structure
multinational banks
internal capital market
intra-bank lending
wholesale funding
financial crisis
JEL:G21
F23
F34
E44
ISBN:978-3-86558-832-6
Document Type:Working Paper
Appears in Collections:Discussion Papers, Deutsche Bundesbank

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