Global Banks and the Transmission of Shocks across Borders
Global Banks and the Transmission of Shocks across Borders

Summary/Abstract: In this study, we explore the impact of solvency and wholesale funding shocks on the lending behavior of 84 OECD parent banks and their 375 foreign subsidiaries. Our findings indicate that solvency shocks play a more significant role than wholesale funding shocks in influencing subsidiary lending. Moreover, we observe that solvency shocks have a heightened impact on larger subsidiary banks operating in mature markets with limited growth opportunities. These results carry substantial theoretical and policy implications, contributing to a deeper understanding of how solvency and wholesale shocks traverse borders and affect the lending dynamics of global banking entities.

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