M. Buch, C., Chapman, J. & Goldberg, L. (2014) “Transmission of liquidity risk through global banks: An International Banking Research Network project“, VoxEU Organisation, 24 June.
The international transmission of liquidity shocks is one of the key questions of banking globalisation. This column discusses a project of central bank researchers from around the world who have been exploring the role of global banks in the transmission of liquidity shocks. Using micro data from individual banks and applying common methodology are of individual interest. But more importantly, it allows us to detect common features of international bank and liquidity shock transmission.
Over the past 30 years, the typical large bank has become a global entity with subsidiaries in many countries. In parallel, financial liberalisation has increased the inter-connectedness of banking systems, with domestic banking systems having become more exposed to shocks transmitted through foreign banks. This globalisation of banking propagated liquidity risk during the financial crisis and the subsequent Eurozone crisis.
Relevant posts:
- Merler, S. (2014) “Shrinking times – ECB excess liquidity falls below €100 billion“, Bruegel Think Tank, 24 April.
- Magnus, G. (2014) “The ECB and Sisyphus: it won’t be finished unless it does QE“, Pieria Online, 09 June.
- Aziz, J. (2014) “Is It Time To End Fractional Reserve Banking?“, Pieria Network, 12 May.