The Effect of Foreign Lending on Domestic Loans: An Analysis of U.S. Global Banks

16 Pages Posted: 27 Feb 2017

See all articles by Edith X. Liu

Edith X. Liu

Board of Governors of the Federal Reserve System

Jonathan Pogach

FDIC, Division of Insurance and Research

Date Written: 2017-02

Abstract

This paper examines the effect of foreign lending on the domestic lending for US global banks. We show that greater foreign loan growth complements, rather than detracts from, domestic commercial lending. Exploiting a confidential data (FFIEC 009) on international loan exposure of US banks, we estimate that a 1% increase in foreign office lending is associated with a 0.6% growth in domestic commercial lending, suggesting complementarity across these lending channels. However, when capital raising is tight during the Global Financial Crisis of 2008, we find that foreign lending did come at the expense of domestic lending.

Keywords: Multinational, Global Banking, Commercial Loans, Foreign Investments

JEL Classification: F21, F23, F36, G21

Suggested Citation

Liu, Edith X. and Pogach, Jonathan, The Effect of Foreign Lending on Domestic Loans: An Analysis of U.S. Global Banks (2017-02). FRB International Finance Discussion Paper No. 1198, Available at SSRN: https://ssrn.com/abstract=2923973 or http://dx.doi.org/10.17016/IFDP.2017.1198

Edith X. Liu (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-3913 (Phone)

HOME PAGE: http://https://www.federalreserve.gov/econresdata/edith-x-liu.htm

Jonathan Pogach

FDIC, Division of Insurance and Research ( email )

550 17th Street NW
Washington, DC 20429
United States

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