Global Liquidity and Drivers of Cross-Border Bank Flows
Global Liquidity and Drivers of Cross-Border Bank Flows

Author: Mr.Eugenio Cerutti

Publisher: International Monetary Fund

Published: 2014-04-29

Total Pages: 33

ISBN-13: 148436211X

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This paper provides a definition of global liquidity consistent with its meaning as the “ease of financing” in international financial markets. Using a longer time series and broader sample of countries than in previous studies, it identifies global factors driving cross-border bank flows, alongside country-specific factors. It confirms the explanatory power of US financial conditions, with flows decreasing in market volatility (VIX) and term premia, and increasing in bank leverage, growth in domestic credit and M2. A new finding is that similar variables for other systemic countries – the UK and the Euro Area – are also important, sometimes even more so, consistent with the dominant role of European banks in cross-border banking. Furthermore, recipient country characteristics are found to affect not only the level of country-specific flows, but also the cyclical impact of global liquidity, with sensitivities of flows to banks decreasing with stronger macroeconomic frameworks and better bank regulation, but less so for flows to non-financial firms.

Global Liquidity and Drivers of Cross-Border Bank Flows
Global Liquidity and Drivers of Cross-Border Bank Flows

Author: Mr.Eugenio Cerutti

Publisher: International Monetary Fund

Published: 2014-04-29

Total Pages: 33

ISBN-13: 1475517726

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This paper provides a definition of global liquidity consistent with its meaning as the “ease of financing” in international financial markets. Using a longer time series and broader sample of countries than in previous studies, it identifies global factors driving cross-border bank flows, alongside country-specific factors. It confirms the explanatory power of US financial conditions, with flows decreasing in market volatility (VIX) and term premia, and increasing in bank leverage, growth in domestic credit and M2. A new finding is that similar variables for other systemic countries – the UK and the Euro Area – are also important, sometimes even more so, consistent with the dominant role of European banks in cross-border banking. Furthermore, recipient country characteristics are found to affect not only the level of country-specific flows, but also the cyclical impact of global liquidity, with sensitivities of flows to banks decreasing with stronger macroeconomic frameworks and better bank regulation, but less so for flows to non-financial firms.

Foreign Currency Bank Funding and Global Factors
Foreign Currency Bank Funding and Global Factors

Author: Signe Krogstrup

Publisher: International Monetary Fund

Published: 2018-05-09

Total Pages: 64

ISBN-13: 1484353668

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The literature on the drivers of capital flows stresses the prominent role of global financial factors. Recent empirical work, however, highlights how this role varies across countries and time, and this heterogeneity is not well understood. We revisit this question by focusing on financial intermediaries’ funding flows in different currencies. A concise portfolio model shows that the sign and magnitude of the response of foreign currency funding flows to global risk factors depend on the financial intermediary’s pre-existing currency exposure. An analysis of a rich dataset of European banks’ aggregate balance sheets lends support to the model predictions, especially in countries outside the euro area.

Bank Leverage and Monetary Policy's Risk-Taking Channel
Bank Leverage and Monetary Policy's Risk-Taking Channel

Author: Mr.Giovanni Dell'Ariccia

Publisher: International Monetary Fund

Published: 2013-06-06

Total Pages: 41

ISBN-13: 1484381130

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We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.

Global Liquidity - Issues for Surveillance
Global Liquidity - Issues for Surveillance

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2014-12-03

Total Pages: 63

ISBN-13: 1498343651

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The paper starts by presenting evidence of commonality in global financial conditions. This commonality is then related to specific drivers of global financial conditions through a range of transmission channels, including cross-border banking and portfolio flows. Empirical analysis shows a range of price and quantity factors, including measures of risk, bank leverage, and interest rates in financial centers, to drive in part these flows. Country specific policies, including exchange rate and prudential frameworks, are shown to affect the transmission of global conditions. Much remains unknown though, including how evolving structures of global funding, changing institutions, and ongoing financial innovations affect the mechanics of liquidity creation, the channels of liquidity transmission, and potential risks going forward.

Coordinated Portfolio investment Survey
Coordinated Portfolio investment Survey

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 1997-01-01

Total Pages: 180

ISBN-13: 1455216569

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This paper presents a coordinated portfolio investment survey guide provided to assist national compilers in the conduct of the Coordinated Portfolio Investment Survey, conducted under the auspices of the IMF with reference to the year-end 1997. The guide covers a variety of conceptual issues that a country must address when conducting a survey. It also covers the practical issues associated with preparing for a national survey. These include setting a timetable, taking account of the legal and confidentiality issues raised, developing a mailing list, and maintaining quality control checks.

Changes in Prudential Policy Instruments — A New Cross-Country Database
Changes in Prudential Policy Instruments — A New Cross-Country Database

Author: Mr.Eugenio M Cerutti

Publisher: International Monetary Fund

Published: 2016-09-08

Total Pages: 23

ISBN-13: 1475535457

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This paper documents the features of a new database that focuses on changes in the intensity in the usage of several widely used prudential tools, taking into account both macro-prudential and micro-prudential objectives. The database coverage is broad, spanning 64 countries, and with quarterly data for the period 2000Q1 through 2014Q4. The five types of prudential instruments in the database are: capital buffers, interbank exposure limits, concentration limits, loan to value (LTV) ratio limits, and reserve requirements. A total of nine prudential tools are constructed since some useful further decompositions are presented, with capital buffers divided into four subindices: general capital requirements, real state credit specific capital buffers, consumer credit specific capital buffers, and other specific capital buffers; and with reserve requirements divided into two sub-indices: domestic currency capital requirements and foreign currency capital requirements. While general capital requirements have the most changes from the cross-country perspective, LTV ratio limits and reserve requirements have the largest number of tightening and loosening episodes. We also analyze the instruments’ usage in relation to the evolution of key variables such as credit, policy rates, and house prices, finding substantial differences in the patterns of loosening or tightening of instruments in relation to business and financial cycles.

Pan-African Banks
Pan-African Banks

Author:

Publisher:

Published: 2015

Total Pages: 102

ISBN-13: 9781475547979

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Pan-African banks are expanding rapidly across the continent, creating cross-border networks, and having a systemic presence in the banking sectors of many Sub-Saharan African countries. These banking groups are fostering financial development and economic integration, stimulating competition and efficiency, introducing product innovation and modern management and information systems, and bringing higher skills and expertise to host countries. At the same time, the rise of pan-African banks presents new challenges for regulators and supervisors. As networks expand, new channels for transmission of macro-financial risks and spillovers across home and host countries may emerge. To ensure that the gains from cross border banking are sustained and avoid raising financial stability risks, enhanced cross-border cooperation on regulatory and supervisory oversight is needed, in particular to support effective supervision on a consolidated basis. This paper takes stock of the development of pan-African banking groups; identifies regulatory, supervisory and resolution gaps; and suggests how the IMF can help the authorities address the related challenges.

Global Waves of Debt
Global Waves of Debt

Author: M. Ayhan Kose

Publisher: World Bank Publications

Published: 2021-03-03

Total Pages: 403

ISBN-13: 1464815453

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The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.