Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283585 
Year of Publication: 
2023
Series/Report no.: 
ZEW Discussion Papers No. 23-064
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
We exploit proprietary information on severed correspondent banking relationships (due to the stricter enforcement of financial crime regulation) to assess how payment disruptions impede cross-border trade. Using firm-level export data from emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate borrowers start to export less. This trade decline occurs on both the extensive and intensive margins, and firms only partially substitute these foregone exports with higher domestic sales. As a result, total firm revenues and employment shrink. These findings highlight an often overlooked function of global banks: providing the payment infrastructure and trade finance that enables firms in less-developed countries to export to richer parts of the world.
Subjects: 
Correspondent banking
trade finance
de-risking
global banks
international trade
anti-money laundering
JEL: 
F14
F15
F36
G21
G28
Document Type: 
Working Paper

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