Discussion Paper

What Drives International Bank Credit?

Abstract: A major question facing policymakers is how to deal with slumps in bank credit. The policy prescriptions are very different depending on whether the decline is a result of global forces, domestic demand, or supply problems in a particular banking system. We present findings from new research that exactly decompose the growth in banks? aggregate foreign credit into these three factors. Using global banking data for the period 2000-16, we uncover some striking patterns in bilateral credit relationships between consolidated banking systems and borrowers in more than 200 countries. The most important we term the ?Anna Karenina Principle? of global banking: all healthy credit relationships behave alike; each unhealthy credit relationship is unhealthy in its own way.

Keywords: international banking; supply shocks; BIS consolidated banking statistics; global financial crisis; demand shocks;

JEL Classification: F00; G1;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2017-09-06

Number: 20170906