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Report
How U.S. Bank Stock Prices Respond to Geopolitical Risk
Geopolitical risk has emerged as a central driver of global financial markets, with episodes such as Russia’s invasion of Ukraine and recent conflicts in the Middle East triggering sharp movements in asset prices and increases in market volatility. This brief examines how geopolitical risk affects U.S. bank valuations and which institutions are most vulnerable. Through cross-border lending, foreign subsidiaries, and trading activities, banks face multifaceted exposure to geopolitical risk that can affect their profitability via credit losses, disrupted funding markets, and altered fee ...
Working Paper
Geopolitical Risk and Global Banking
How do banks respond to geopolitical risk, and is this response distinct from other macroeconomic risks? Using U.S. supervisory data and new geopolitical risk indices, we show that banks reduce cross-border lending to countries with elevated geopolitical risk but continue lending to those markets through foreign affiliates—unlike their response to other macro risks. Furthermore, banks reduce domestic lending when geopolitical risk rises abroad, especially when they operate foreign affiliates. A simple banking model in which geopolitical shocks feature expropriation risk can explain these ...
Working Paper
The Dollar Channel of Monetary Policy Transmission
This paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous changes in euro-area interest rates and stock prices affect U.S. leveraged loan spreads. Specifically, in response to dollar appreciation, investors require higher compensation for risk, and borrowing costs for U.S. firms increase. These findings imply a causal link between the U.S. dollar and ...
Discussion Paper
Measuring Geopolitical Risk Exposure Across Industries: A Firm-Centered Approach
Business sentiment shapes real outcomes. Firms respond not only to hard data but also act on how they perceive risks and uncertainty. A growing literature shows that shifts in business sentiment can meaningfully affect investment, employment, and firm performance, even when fundamentals are unchanged.
Discussion Paper
Trade Finance Activities of U.S. Banks: What the Data Can Tell Us
Trade finance encompasses a range of financial instruments and services designed to facilitate international trade. U.S. banks are key providers of these services. This note draws on several regulatory data sources to show that trade finance supports a sizeable share of international trade, is highly concentrated in large U.S. banks, and has declined over time.
Discussion Paper
How U.S. Bank Stock Prices Respond to Geopolitical Risk
Geopolitical risk has emerged as a central driver of global financial markets, with episodes such as Russia's invasion of Ukraine and recent conflicts in the Middle East triggering sharp movements in asset prices and increases in market volatility. But not all industries are exposed to such shocks in the same way (Caldara and Iacoviello 2022; Culver, Niepmann, and Shen 2025).
Discussion Paper
How the Federal Reserve's Central Bank Swap Lines Have Supported U.S. Corporate Borrowers in the Leveraged Loan Market
The cost of borrowing U.S. dollars through foreign exchange (FX) swap markets increased significantly in the beginning of the Covid-19 pandemic in February 2020, indicated by larger deviations from Covered Interest Rate Parity (CIP). CIP deviations narrowed again when the Federal Reserve expanded its swap lines to support U.S. dollar liquidity globally—by enhancing and extending its swap facility with foreign central banks and introducing the new temporary Foreign and International Monetary Authorities (FIMA) repurchase agreement facility.
Discussion Paper
What determines passthrough of policy rates to deposit rates in the euro area?
Interest rates on bank deposits are sticky and move only sluggishly following changes in central bank policy rates. As deposits are typically the largest share of bank liabilities, deposit rate stickiness plays a key role for bank funding costs and profitability.
Discussion Paper
Central bank liquidity facilities around the world
A core task of central banks is to provide liquidity to banks, with the goal of facilitating monetary policy implementation, ensuring the smooth functioning of the payment system, and promoting financial stability. While central banks around the world pursue these goals, the design of liquidity facilities differs across countries. This note provides an overview of liquidity facilities around the world that resemble the Federal Reserve’s discount window as well as intraday credit, comparing and contrasting setups in different countries.
Working Paper
Geopolitical Risk and Global Banking
How do banks respond to geopolitical risk, and is this response distinct from other macroeconomic risks? Using U.S. supervisory data and new geopolitical risk indices, we show that banks reduce cross-border lending to countries with elevated geopolitical risk but continue lending to those markets through foreign affiliatesâ unlike their response to other macro risks. Furthermore, banks reduce domestic lending when geopolitical risk rises abroad, especially when they operate foreign affiliates. A simple banking model in which geopolitical shocks feature expropriation risk can explain these ...