IMF Economic Review

, Volume 63, Issue 3, pp 515–541 | Cite as

International Banking and Liquidity Risk Transmission: Evidence from Hong Kong S.A.R.

  • Eric Wong
  • Andrew Tsang
  • Steven Kong


This study provides four findings regarding the international transmission of liquidity risk through global banks’ branches in host countries. First, we find that when home-country liquidity risk emerges, parent banks with higher shares of stable funding would sustain higher loan growth for their branches in Hong Kong S.A.R. than other foreign bank branches (FBBs) in Hong Kong S.A.R. Second, those FBBs that are net users (suppliers) of internal funding are found to have stronger (lower) loan growth than their peers in the face of liquidity risk. Third, these drivers of cross-sectional differences in loan growth become not important for the risk transmission when banks access official lending facilities. Finally, FBBs are more sensitive to U.S.-dollar liquidity risk than home-country liquidity risk.

JEL Classifications

E44 F36 G32 

Supplementary material (186 kb)
Supplementary material, approximately 190 KB.


  1. Buch, C. M. and L. S. Goldberg, 2014, “International Banking and Liquidity Risk Transmission: Lessons from Across Countries,” IMF Economic Review, Vol. 63, No. 3, pp. 377–410.CrossRefGoogle Scholar
  2. Cetorelli, N. and L.S. Goldberg, 2012a, “Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession,” American Economic Review, Vol. 102, No. 3, pp. 213–18.CrossRefGoogle Scholar
  3. Cetorelli, N. and L.S. Goldberg, 2012b, “Liquidity Management of US Global Banks: Internal Capital Markets in the Great Recession,” Journal of International Economics, Vol. 88, No. 2, pp. 299–311.CrossRefGoogle Scholar
  4. Cornett, M.M., J.J. McNutt, P.E. Strahan, and H. Tehranian, 2011, “Liquidity Risk Management and Credit Supply in the Financial Crisis,” Journal of Financial Economics, Vol. 101, No. 2, pp. 297–312.CrossRefGoogle Scholar
  5. Financial Stability Board. 2013, “2013 update of group of global systemically important banks,” November 11.Google Scholar
  6. Goldberg, L. S., C. Kennedy, and J. Miu, 2012, Central bank dollar swap lines and overseas dollar funding costs, Federal Reserve Bank of New York Staff Reports no. 429.Google Scholar
  7. KPMG. 2014, Hong Kong S.A.R. Banking Survey 2014 (Hong Kong S.A.R.: KPMG).Google Scholar
  8. Kwan, S., E. Wong, and C. Hui, 2015, “The International Transmission of Shocks: Foreign Bank Branches in Hong Kong S.A.R. During Crises,” HKIMR Working Paper No.02/2015.Google Scholar

Copyright information

© International Monetary Fund 2015

Authors and Affiliations

  • Eric Wong
  • Andrew Tsang
  • Steven Kong

There are no affiliations available

Personalised recommendations