The Dollar Shortage in Global Banking and the International Policy Response

International Finance 15(2), 2012: pp. 155-178

Posted: 26 May 2013

See all articles by Goetz von Peter

Goetz von Peter

Bank for International Settlements - Research and Policy Analysis

Date Written: 2012

Abstract

Among the policy responses to the global financial crisis, the international provision of US dollars via central bank swap lines stands out. This paper studies the build-up of stresses on banks’ balance sheets that led to this coordinated policy response. We reconstruct the worldwide consolidated balance sheets of the major national banking systems to investigate the structure of their global operations across offices worldwide, shedding light on how their international asset positions were funded across currencies and counterparties. The analysis shows how the growth in European banks’ US dollar assets produced structural US dollar funding needs, setting the stage for the global dollar shortage when interbank and swap markets became impaired. We demonstrate that such vulnerabilities are best measured along the contours of banks’ consolidated balance sheets, rather than along national borders.

Keywords: International banking, financial crises, funding risk, US dollar shortage, central bank swap lines

JEL Classification: F34, F55, G01, G21

Suggested Citation

von Peter, Goetz, The Dollar Shortage in Global Banking and the International Policy Response (2012). International Finance 15(2), 2012: pp. 155-178, Available at SSRN: https://ssrn.com/abstract=2269780

Goetz Von Peter (Contact Author)

Bank for International Settlements - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
+ 41 61 280 8840 (Phone)

HOME PAGE: http://www.bis.org/author/goetz_von_peter.htm

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