Hidden Bibliographic Details
| Other authors / contributors: | Cerutti, Eugenio, author, (IMF staff)
Martinez Peria, Maria Soledad, author, (IMF staff)
International Monetary Fund. Research Department, publisher.
World Bank. Development Research Group.
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| ISBN: | 9781484382189
1484382188
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| Notes: | "June 2016."
"Research Department."
Includes bibliographical references (pages 18-21).
Description based on online resource; title from pdf title page (IMF.org website, viewed July 13, 2016).
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| Summary: | This paper examines the association between the default risk of foreign bank subsidiaries and their parents during the global financial crisis, with the purpose of understanding what factors can help insulate affiliates from their parents. The paper finds evidence of a significant positive correlation between parent banks' and foreign subsidiaries' default risk. This correlation is lower for subsidiaries that have higher capital, retail deposit funding, and profitability ratios and that are more independently managed from their parents. Host country regulations also influence the extent to which shocks to the parents affect the subsidiaries' default risk. In particular, the correlation between the default risk of the subsidiary and the parent is lower for subsidiaries operating in countries that impose higher capital, reserve, provisioning, and disclosure requirements and tougher restrictions on bank activities.
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