Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334933 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3073
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
How do violent conflicts shape cross-border lending? Using data on syndicated loans by 14,021 creditors to firms in 179 countries (1989-2020), we document a dual effect: foreign banks reduce overall lending relative to domestic banks but significantly increase financing to military and dual-use sectors during conflicts. This reallocation is stronger among lenders less specialized in the conflict country, more specialized in military lending, and domiciled in politically non-aligned nations. Effects are geographically contained and temporally limited, dissipating post-conflict. Our findings reveal how global banks strategically redirect credit toward military sectors during armed conflicts, despite reducing overall country exposure.
Subjects: 
Cross-border lending
syndicated loans
violent conflict
geopolitical risk
bank specialization
banking policy
international finance
defence expenditure
defence budget
financial stability
cross-border dimension
monetary policy
defence policy
geopolitics
loan
war economy
report
JEL: 
D74
F34
F40
G15
G21
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7376-2
Document Type: 
Working Paper

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