International Banking and Liquidity Risk Transmission: Evidence from Italy

Caccavaio, Marianna; Carpinelli, Luisa; Marinelli, Giuseppe; Sette, Enrico

doi:10.1057/imfer.2015.22

“…Also, the foreign currency component of loans to the non-financial sector doubles to 2% and 22% respectively for residents and non-residents. As shown by Caccavaio et al (2015) of total assets in the restricted sample), followed by the US (respectively 0.3% and 0.5%).…”

Section: Italymentioning

confidence: 87%

International spillovers of monetary policy: Evidence from France and Italy

Schmidt

¹

,

Caccavaio

²

,

Carpinelli

³

et al. 2018

Journal of International Money and Finance

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In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000-2015, exploring the existence of an international bank lending channel. Exploiting bank balance sheet heterogeneity, we find that monetary policy tightening abroad leads to a reduction of credit supply at home, in particular for US monetary policy changes. Our results show that USD funding plays an important role in the transmission mechanism, especially for French banks which rely to a larger extent on USD funding. We also show that banks adjust their euro and foreign currency lending differently, thus implying that funding sources in different currencies are not perfect substitutes. This is especially the case when tensions in currency swap markets are high, thus resulting in costly cross-currency funding.

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“…The outward transmission channel analyzed in studies using regulatory data for, respectively, Canada, France, Italy, and the Netherlands confirm positive prudential spillover effects: as domestic prudential instruments tightened, foreign lending growth tended to increase (Bussière, Schmidt, and Vinas, 2016;Caccavaio, Carpinelli, and Marinelli, 2018;Damar and Mordel, 2016;Frost, de Haan, and Van Horen, 2017). In the case of Italy, inward transmission through hosted branches was observed specifically in response to changes in local reserve requirements and sectorspecific capital buffers.…”

Section: Prudential Spillovers Using Bank-specific Datamentioning

confidence: 88%

International Banking and Nonbank Financial Intermediation: Global Liquidity, Regulation, and Implications

Buch,

Goldberg

2024

Staff Reports (Federal Reserve Bank of New York)

0

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Global liquidity flows are largely channeled through banks and nonbank financial institutions. The common drivers of global liquidity flows include monetary policy in advanced economies and risk conditions. At the same time, the sensitivities of liquidity flows to changes in these drivers differ across institutions and have been evolving over time. Microprudential regulation of banks plays a role, influencing leverage and capitalization, changing sensitivities to shocks, and also driving risk migration from banks to nonbank financial institutions. Risk sensitivities and flightiness of global liquidity are now strongest in more leveraged nonbank financial institutions, raising challenges in stress episodes. Current policy initiatives target linkages across different types of financial institutions and associated risks. Meanwhile, significant gaps remain. This paper concludes by discussing policy options for addressing systemic risk in banks and nonbanks.

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“…Also, the foreign currency component of loans to the non-financial sector doubles to 2% and 22% respectively for residents and non-residents. As shown by Caccavaio et al (2015), Italian banks lend cross-border predominantly to Euro area counterparties, other Eastern European countries, the UK and North America. On average, cross-border loans and deposits vis-à-vis the UK are the most relevant component of the non-Euro area exposures (respectively 2% and 6% of total assets in the restricted sample), followed by the US (respectively 0.3% and 0.5%).…”

Section: Italymentioning

confidence: 99%

International Spillovers of Monetary Policy: Evidence from France and Italy

Schmidt

¹

,

Caccavaio

²

,

Carpinelli

³

et al. 2018

Self Cite

View full text Add to dashboard Cite

In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000-2015, exploring the existence of an international bank lending channel. Exploiting bank balance sheet heterogeneity, we find that monetary policy tightening abroad leads to a reduction of credit supply at home, in particular for US monetary policy changes. Our results show that USD funding plays an important role in the transmission mechanism, especially for French banks which rely to a larger extent on USD funding. We also show that banks adjust their euro and foreign currency lending differently, thus implying that funding sources in different currencies are not perfect substitutes. This is especially the case when tensions in currency swap markets are high, thus resulting in costly cross-currency funding.

show abstract

International Banking and Liquidity Risk Transmission: Evidence from Italy

Cited by 6 publications

References 6 publications

International spillovers of monetary policy: Evidence from France and Italy

International spillovers of monetary policy: Evidence from France and Italy

International Banking and Nonbank Financial Intermediation: Global Liquidity, Regulation, and Implications

International Spillovers of Monetary Policy: Evidence from France and Italy

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