International Banking and Liquidity Risk Transmission: Evidence from Ireland
- 64 Downloads
The increased international expansion of Irish banks, combined with entry into the domestic market by a number of foreign competitors makes Ireland a pertinent country for studying the international transmission of liquidity risk. Using bank-level panel data and novel data on access to central bank liquidity and Exceptional Liquidity Assistance, regression analysis confirms a risk-absorbing effect, whereby official liquidity helped mitigate the effect of liquidity risk on domestic lending by larger Irish banks. Regression analysis also confirms that a larger net borrowing position vis-à-vis foreign affiliates insulates the effect of liquidity risk on domestic lending, suggesting that banks’ internal capital markets can provide a counterweight to systemic risks.
JEL ClassificationsE44 F36 G32
- Buch, Claudia M. and Linda Goldberg, 2014, “International Banking and Liquidity Risk Management: Lessons from Across Countries,” Working Paper 20286 (Cambridge, MA: National Bureau of Economic Research).Google Scholar
- Cerutti, E., A. Ilyina, Y. Makarova, and C. Schmieder, 2010, “Bankers Without Borders? Implications of Ring-Fencing for European Cross-Border Banks,” Chapter in SUERF Studies, SUERF—The European Money and Finance Forum, ed. by P. Backé, E. Gnan, and P. Hartmann.Google Scholar
- Laeven, L. and F. Valencia, 2012, “Systemic Banking Crises Database: An Update,” IMF Working Papers 12/163 (International Monetary Fund).Google Scholar