Channels of Transmission of the 2007/09 Global Crisis to International Bank Lending in Developing Countries

During a financial crisis, credit provision by international banks may be stymied by three distinct, but related, channels: changes in lending standards as a result of increased economic uncertainty, changes in funding availability from interbank l...

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Bibliographic Details
Main Authors:	Adams-Kane, Jonathon, Jia, Yueqing, Lim, Jamus Jerome
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCELERATOR ACCESS TO CREDIT ACCOUNTING AFFILIATES AGRICULTURE AIC ALLOCATION OF CREDIT ASSET HOLDINGS ASSET MARKETS ASSET PRICE ASSET PRICES AUCTION AVAILABILITY OF CREDIT BALANCE SHEET BALANCE-SHEET BANK ACTIVITY BANK BALANCE SHEET BANK BALANCE SHEETS BANK BEHAVIOR BANK BONDS BANK CREDIT BANK LIQUIDITY BANK LOAN BANK LOANS BANK ORIGIN BANKING ASSETS BANKING SECTOR BANKRUPTCY BENCHMARK BID BINDING CONSTRAINT BORROWER BORROWING BORROWING COSTS BORROWINGS CAPITAL MARKETS CD CDS CENTRAL BANK CENTRAL BANKS CERTIFICATE OF DEPOSIT CERTIFICATES OF DEPOSIT CHANNELS OF CREDIT CHECKS COMMERCIAL CREDIT COMMERCIAL LOAN COMMERCIAL LOAN MARKET COMMERCIAL PAPER COMPARATIVE ECONOMICS CORPORATE INVESTMENT COST OF CAPITAL COUPON COUPON PAYMENTS CREDIT ACCESS CREDIT ALLOCATION CREDIT AVAILABILITY CREDIT CRUNCH CREDIT DEFAULT CREDIT DEFAULT SWAP CREDIT DEFAULT SWAPS CREDIT LINES CREDIT MARKET CREDIT MARKETS CREDIT PROVISION CREDIT RATIONING CREDIT RISK CREDIT WORTHINESS CREDITWORTHY BORROWERS CRISIS LENDING CURRENCY CURRENCY CRISES DEBT DEBT CRISIS DEBT OBLIGATIONS DEGREE OF LIQUIDITY DEGREE OF RISK DEMAND-SIDE FACTORS DEPENDENCY RATIO DEPENDENT DEPOSITS DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIVIDEND DOMESTIC BANK DOMESTIC BANKS DOMESTIC CREDIT ECONOMIC POLICY ECONOMIC RESEARCH ELASTICITY EMERGING ECONOMIES EMERGING MARKET EMERGING MARKETS EUROPEAN CENTRAL BANK EXCHANGE RATE EXCHANGE RATES EXPECTED VALUE EXTERNAL FINANCE FEDERAL RESERVE FINANCIAL CONTAGION FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DATA FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SHOCKS FINANCIAL STABILITY FINANCIAL STRESS FINANCIAL SUPPORT FIXED RATE FLOW OF CREDIT FOREIGN BANK FOREIGN BANK ENTRY FOREIGN BANK PARTICIPATION FOREIGN BANK PENETRATION FOREIGN BANKS FOREIGN CLAIMS FOREIGN CURRENCIES FOREIGN EXCHANGE FOREIGN LENDERS FUTURE RESEARCH GDP GLOBAL BANKING GROSS DOMESTIC PRODUCT HOST COUNTRY HOST ECONOMIES HOST ECONOMY IMPLIED VOLATILITY INCOME INFLATION INFLATION RATE INFLATION RATES INFORMATIONAL ASYMMETRIES INSTRUMENT INTERBANK MARKETS INTEREST RATE INTEREST RATE SPREADS INTEREST RATES INTERNAL FINANCING INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL BANK LENDING INTERNATIONAL BANKING INTERNATIONAL BANKS INTERNATIONAL INVESTORS INTERNATIONAL LENDING INVESTMENT VEHICLES LARGE FIRMS LENDERS LIQUID ASSETS LIQUIDITY LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LIQUIDITY MANAGEMENT LIQUIDITY PROBLEMS LIQUIDITY RISK LOAN ASSETS LOAN DEMAND LOAN MARKET LOAN OFFICER LOAN OFFICERS LOAN PRINCIPAL LOANABLE FUNDS LOCAL BANKS LOCAL CURRENCY MACROECONOMICS MARGINAL VALUE MARKET CONDITIONS MARKET LIQUIDITY MARKET PARTICIPANTS MONETARY POLICY MONETARY SHOCKS MONEY MARKET MORTGAGE MORTGAGE CREDIT MORTGAGE-BACKED SECURITIES NATIONAL SAVING NET WORTH NEW CREDIT OPEN ECONOMIES OPPORTUNITY COST OUTSTANDING LOANS POLICY ENVIRONMENT POLICY RESPONSE PORTFOLIO PORTFOLIOS POSITIVE COEFFICIENT PRICE INDEXES PRICE VOLATILITY PRIMARY MARKETS RATE OF RETURN REAL GROSS DOMESTIC PRODUCT REAL INTEREST REAL INTEREST RATES RECESSION RETURNS RISK AVERSION RISK EXPOSURE SECURITIES MARKET SHORT-TERM LIQUIDITY SMALL BUSINESS SMALL BUSINESSES SOLVENCY SOLVENCY PROBLEMS SOVEREIGN DEBT STOCK MARKET SUPPLY OF CREDIT SWAP TRANSMISSION OF MONETARY POLICY UNSECURED LOANS UTILITY FUNCTION VALUATION VALUATIONS WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2012/03/15967985/channels-transmission-200709-global-crisis-international-bank-lending-developing-countries http://hdl.handle.net/10986/19870

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Summary:	During a financial crisis, credit provision by international banks may be stymied by three distinct, but related, channels: changes in lending standards as a result of increased economic uncertainty, changes in funding availability from interbank liquidity markets, and changes in solvency due to effects on bank balance sheets. This paper illuminates the manner by which each of these channels independently operated to affect developed-country bank lending in developing countries during the global financial crisis of 2007/09. It quantifies how changes in banks' uncertainty about the value of their asset holdings, access to interbank liquidity, and internal balance sheet considerations altered their supply of credit in the run-up, during, and in the immediate aftermath of the financial crisis, both in terms of their relative magnitudes, as well as the sensitivity of these magnitudes to the crisis.

Channels of Transmission of the 2007/09 Global Crisis to International Bank Lending in Developing Countries

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