Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?

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 pape...

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Main Authors:	Anginer, Deniz, Cerutti, Eugenio, Martinez Peria, Maria Soledad
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	ACCOUNTING ACQUISITION AFFILIATE AFFILIATES ALLOCATION OF CAPITAL ALTERNATIVE INVESTMENTS AMOUNT OF CAPITAL ARREARS ASSET DIVERSIFICATION ASSET QUALITY ASSET VALUE ASSET VALUES ASSETS RATIO BALANCE SHEET BANK ACCOUNTS BANK BALANCE SHEETS BANK COMPETITION BANK HOLDING BANK HOLDING COMPANY BANK LENDING BANK LIQUIDITY BANK LOANS BANK OF BOTSWANA BANK OF GREECE BANK POLICY BANK REGULATION BANK REGULATIONS BANK SUPERVISION BANKING CORPORATION BANKING CRISES BANKING REGULATIONS BANKING SUPERVISION BANKING SYSTEMS BANKRUPTCY BANKS BOARD MEMBERS BOOK VALUE BOOK VALUES CALL OPTION CAPITAL ADEQUACY CAPITAL REGULATION CAPITAL REQUIREMENTS CAPITALS CHARTER CHECKS COLLATERAL COMMERCIAL BANK CONSOLIDATED FINANCIAL STATEMENTS CORPORATE DEBT CORRECTIVE ACTION CORRECTIVE ACTIONS CREDIT BANK CREDIT MARKETS CREDIT RATIONING CREDIT RISK CREDIT SPREAD CROSS-BORDER BANKING DEBT DEFAULT PROBABILITIES DEFAULT PROBABILITY DEFAULT RISK DEFAULT RISKS DEFAULTS DEPOSIT DEPOSIT INSURANCE DEPOSITS DERIVATIVE PRODUCTS DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT BANK DISCLOSURE REQUIREMENTS DIVIDEND DOMESTIC BANK DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC SHOCKS ECONOMIES OF SCALE EMERGING MARKET EQUITY HOLDERS EQUITY RATIO EQUITY RETURNS EQUITY VALUE ESTATE EVENT OF DEFAULT FACE VALUE FACE VALUE OF DEBT FEDERAL RESERVE FINANCIAL CONTRACTS FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL INTERMEDIATION FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL STUDIES FOREIGN BANK FOREIGN BANK PARTICIPATION FOREIGN BANKS HOLDING HOLDING COMPANIES HOLDINGS HOST COUNTRIES HOST COUNTRY IMPLIED VOLATILITIES IMPLIED VOLATILITY INCOME STATEMENT INDEPENDENT BANKS INSOLVENCY INSURANCE INTEREST RATE INTEREST RATE DATA INTEREST RATE SPREAD INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANK LENDING INTERNATIONAL BANKING INTERNATIONAL BANKS INTERNATIONAL FINANCIAL SYSTEM INTERPOLATION INVESTMENT REGULATIONS ISLAMIC BANK JURISDICTIONS LARGE BANKS LEGAL ENTITIES LEVERAGE LIMITED LIQUID ASSETS LIQUIDITY RISK LOAN LOAN CLASSIFICATION LOAN LOSS LOAN LOSS PROVISIONS LTD. MARKET EQUITY MARKET INFORMATION MARKET VALUE MARKET VALUE OF EQUITY MONETARY FUND MULTINATIONAL MULTINATIONAL BANK MULTINATIONAL BANKS MUTUAL FUND MUTUAL FUND INDUSTRY NONPERFORMING LOANS POLITICAL ECONOMY PROBABILITY OF BANKRUPTCY PROBABILITY OF DEFAULT PROFITABILITY PROXY PUBLIC BANKS REAL ESTATE RECESSIONS REGULATORY AUTHORITIES REGULATORY REGIME REGULATORY REGIMES REGULATORY SYSTEM RESERVE RESERVE REQUIREMENT RESERVE REQUIREMENTS RESERVES RESTRICTIONS ON BANK ACTIVITIES RETURN RISK CONTROL RISK PROFILES RISK WEIGHTED ASSETS RISK-FREE RATE SECURITIES SHARE OF BANK ASSETS SOCIAL DEVELOPMENT SOLVENCY STOCK MARKET STOCK MARKET PRICES STOCK MARKETS STOCK RETURN SUBSIDIARIES SUBSIDIARY SUPERVISION OF BANKS SUPERVISORY AUTHORITIES SUPERVISORY POWERS SYSTEM ASSETS SYSTEMIC RISK TREASURY TREASURY YIELD UNION USE OF DERIVATIVE VALUE OF ASSETS WHOLESALE FUNDING
Online Access:	http://documents.worldbank.org/curated/en/2014/10/20261594/foreign-bank-subsidiaries-default-risk-during-global-crisis-factors-help-insulate-affiliates-parents http://hdl.handle.net/10986/20517

id	okr-10986-20517
recordtype	oai_dc
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTING ACQUISITION AFFILIATE AFFILIATES ALLOCATION OF CAPITAL ALTERNATIVE INVESTMENTS AMOUNT OF CAPITAL ARREARS ASSET DIVERSIFICATION ASSET QUALITY ASSET VALUE ASSET VALUES ASSETS RATIO BALANCE SHEET BANK ACCOUNTS BANK BALANCE SHEETS BANK COMPETITION BANK HOLDING BANK HOLDING COMPANY BANK LENDING BANK LIQUIDITY BANK LOANS BANK OF BOTSWANA BANK OF GREECE BANK POLICY BANK REGULATION BANK REGULATIONS BANK SUPERVISION BANKING CORPORATION BANKING CRISES BANKING REGULATIONS BANKING SUPERVISION BANKING SYSTEMS BANKRUPTCY BANKS BOARD MEMBERS BOOK VALUE BOOK VALUES CALL OPTION CAPITAL ADEQUACY CAPITAL REGULATION CAPITAL REQUIREMENTS CAPITALS CHARTER CHECKS COLLATERAL COMMERCIAL BANK CONSOLIDATED FINANCIAL STATEMENTS CORPORATE DEBT CORRECTIVE ACTION CORRECTIVE ACTIONS CREDIT BANK CREDIT MARKETS CREDIT RATIONING CREDIT RISK CREDIT SPREAD CROSS-BORDER BANKING DEBT DEFAULT PROBABILITIES DEFAULT PROBABILITY DEFAULT RISK DEFAULT RISKS DEFAULTS DEPOSIT DEPOSIT INSURANCE DEPOSITS DERIVATIVE PRODUCTS DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT BANK DISCLOSURE REQUIREMENTS DIVIDEND DOMESTIC BANK DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC SHOCKS ECONOMIES OF SCALE EMERGING MARKET EQUITY HOLDERS EQUITY RATIO EQUITY RETURNS EQUITY VALUE ESTATE EVENT OF DEFAULT FACE VALUE FACE VALUE OF DEBT FEDERAL RESERVE FINANCIAL CONTRACTS FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL INTERMEDIATION FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL STUDIES FOREIGN BANK FOREIGN BANK PARTICIPATION FOREIGN BANKS HOLDING HOLDING COMPANIES HOLDINGS HOST COUNTRIES HOST COUNTRY IMPLIED VOLATILITIES IMPLIED VOLATILITY INCOME STATEMENT INDEPENDENT BANKS INSOLVENCY INSURANCE INTEREST RATE INTEREST RATE DATA INTEREST RATE SPREAD INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANK LENDING INTERNATIONAL BANKING INTERNATIONAL BANKS INTERNATIONAL FINANCIAL SYSTEM INTERPOLATION INVESTMENT REGULATIONS ISLAMIC BANK JURISDICTIONS LARGE BANKS LEGAL ENTITIES LEVERAGE LIMITED LIQUID ASSETS LIQUIDITY RISK LOAN LOAN CLASSIFICATION LOAN LOSS LOAN LOSS PROVISIONS LTD. MARKET EQUITY MARKET INFORMATION MARKET VALUE MARKET VALUE OF EQUITY MONETARY FUND MULTINATIONAL MULTINATIONAL BANK MULTINATIONAL BANKS MUTUAL FUND MUTUAL FUND INDUSTRY NONPERFORMING LOANS POLITICAL ECONOMY PROBABILITY OF BANKRUPTCY PROBABILITY OF DEFAULT PROFITABILITY PROXY PUBLIC BANKS REAL ESTATE RECESSIONS REGULATORY AUTHORITIES REGULATORY REGIME REGULATORY REGIMES REGULATORY SYSTEM RESERVE RESERVE REQUIREMENT RESERVE REQUIREMENTS RESERVES RESTRICTIONS ON BANK ACTIVITIES RETURN RISK CONTROL RISK PROFILES RISK WEIGHTED ASSETS RISK-FREE RATE SECURITIES SHARE OF BANK ASSETS SOCIAL DEVELOPMENT SOLVENCY STOCK MARKET STOCK MARKET PRICES STOCK MARKETS STOCK RETURN SUBSIDIARIES SUBSIDIARY SUPERVISION OF BANKS SUPERVISORY AUTHORITIES SUPERVISORY POWERS SYSTEM ASSETS SYSTEMIC RISK TREASURY TREASURY YIELD UNION USE OF DERIVATIVE VALUE OF ASSETS WHOLESALE FUNDING
spellingShingle	ACCOUNTING ACQUISITION AFFILIATE AFFILIATES ALLOCATION OF CAPITAL ALTERNATIVE INVESTMENTS AMOUNT OF CAPITAL ARREARS ASSET DIVERSIFICATION ASSET QUALITY ASSET VALUE ASSET VALUES ASSETS RATIO BALANCE SHEET BANK ACCOUNTS BANK BALANCE SHEETS BANK COMPETITION BANK HOLDING BANK HOLDING COMPANY BANK LENDING BANK LIQUIDITY BANK LOANS BANK OF BOTSWANA BANK OF GREECE BANK POLICY BANK REGULATION BANK REGULATIONS BANK SUPERVISION BANKING CORPORATION BANKING CRISES BANKING REGULATIONS BANKING SUPERVISION BANKING SYSTEMS BANKRUPTCY BANKS BOARD MEMBERS BOOK VALUE BOOK VALUES CALL OPTION CAPITAL ADEQUACY CAPITAL REGULATION CAPITAL REQUIREMENTS CAPITALS CHARTER CHECKS COLLATERAL COMMERCIAL BANK CONSOLIDATED FINANCIAL STATEMENTS CORPORATE DEBT CORRECTIVE ACTION CORRECTIVE ACTIONS CREDIT BANK CREDIT MARKETS CREDIT RATIONING CREDIT RISK CREDIT SPREAD CROSS-BORDER BANKING DEBT DEFAULT PROBABILITIES DEFAULT PROBABILITY DEFAULT RISK DEFAULT RISKS DEFAULTS DEPOSIT DEPOSIT INSURANCE DEPOSITS DERIVATIVE PRODUCTS DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT BANK DISCLOSURE REQUIREMENTS DIVIDEND DOMESTIC BANK DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC SHOCKS ECONOMIES OF SCALE EMERGING MARKET EQUITY HOLDERS EQUITY RATIO EQUITY RETURNS EQUITY VALUE ESTATE EVENT OF DEFAULT FACE VALUE FACE VALUE OF DEBT FEDERAL RESERVE FINANCIAL CONTRACTS FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL INTERMEDIATION FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL STUDIES FOREIGN BANK FOREIGN BANK PARTICIPATION FOREIGN BANKS HOLDING HOLDING COMPANIES HOLDINGS HOST COUNTRIES HOST COUNTRY IMPLIED VOLATILITIES IMPLIED VOLATILITY INCOME STATEMENT INDEPENDENT BANKS INSOLVENCY INSURANCE INTEREST RATE INTEREST RATE DATA INTEREST RATE SPREAD INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANK LENDING INTERNATIONAL BANKING INTERNATIONAL BANKS INTERNATIONAL FINANCIAL SYSTEM INTERPOLATION INVESTMENT REGULATIONS ISLAMIC BANK JURISDICTIONS LARGE BANKS LEGAL ENTITIES LEVERAGE LIMITED LIQUID ASSETS LIQUIDITY RISK LOAN LOAN CLASSIFICATION LOAN LOSS LOAN LOSS PROVISIONS LTD. MARKET EQUITY MARKET INFORMATION MARKET VALUE MARKET VALUE OF EQUITY MONETARY FUND MULTINATIONAL MULTINATIONAL BANK MULTINATIONAL BANKS MUTUAL FUND MUTUAL FUND INDUSTRY NONPERFORMING LOANS POLITICAL ECONOMY PROBABILITY OF BANKRUPTCY PROBABILITY OF DEFAULT PROFITABILITY PROXY PUBLIC BANKS REAL ESTATE RECESSIONS REGULATORY AUTHORITIES REGULATORY REGIME REGULATORY REGIMES REGULATORY SYSTEM RESERVE RESERVE REQUIREMENT RESERVE REQUIREMENTS RESERVES RESTRICTIONS ON BANK ACTIVITIES RETURN RISK CONTROL RISK PROFILES RISK WEIGHTED ASSETS RISK-FREE RATE SECURITIES SHARE OF BANK ASSETS SOCIAL DEVELOPMENT SOLVENCY STOCK MARKET STOCK MARKET PRICES STOCK MARKETS STOCK RETURN SUBSIDIARIES SUBSIDIARY SUPERVISION OF BANKS SUPERVISORY AUTHORITIES SUPERVISORY POWERS SYSTEM ASSETS SYSTEMIC RISK TREASURY TREASURY YIELD UNION USE OF DERIVATIVE VALUE OF ASSETS WHOLESALE FUNDING Anginer, Deniz Cerutti, Eugenio Martinez Peria, Maria Soledad Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?
relation	Policy Research Working Paper;No. 7053
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Anginer, Deniz Cerutti, Eugenio Martinez Peria, Maria Soledad
author_facet	Anginer, Deniz Cerutti, Eugenio Martinez Peria, Maria Soledad
author_sort	Anginer, Deniz
title	Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?
title_short	Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?
title_full	Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?
title_fullStr	Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?
title_full_unstemmed	Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?
title_sort	foreign bank subsidiaries' default risk during the global crisis : what factors help insulate affiliates from their parents?
publisher	World Bank Group, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/10/20261594/foreign-bank-subsidiaries-default-risk-during-global-crisis-factors-help-insulate-affiliates-parents http://hdl.handle.net/10986/20517
_version_	1764445579467816960
spelling	okr-10986-205172021-04-23T14:03:56Z Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents? Anginer, Deniz Cerutti, Eugenio Martinez Peria, Maria Soledad ACCOUNTING ACQUISITION AFFILIATE AFFILIATES ALLOCATION OF CAPITAL ALTERNATIVE INVESTMENTS AMOUNT OF CAPITAL ARREARS ASSET DIVERSIFICATION ASSET QUALITY ASSET VALUE ASSET VALUES ASSETS RATIO BALANCE SHEET BANK ACCOUNTS BANK BALANCE SHEETS BANK COMPETITION BANK HOLDING BANK HOLDING COMPANY BANK LENDING BANK LIQUIDITY BANK LOANS BANK OF BOTSWANA BANK OF GREECE BANK POLICY BANK REGULATION BANK REGULATIONS BANK SUPERVISION BANKING CORPORATION BANKING CRISES BANKING REGULATIONS BANKING SUPERVISION BANKING SYSTEMS BANKRUPTCY BANKS BOARD MEMBERS BOOK VALUE BOOK VALUES CALL OPTION CAPITAL ADEQUACY CAPITAL REGULATION CAPITAL REQUIREMENTS CAPITALS CHARTER CHECKS COLLATERAL COMMERCIAL BANK CONSOLIDATED FINANCIAL STATEMENTS CORPORATE DEBT CORRECTIVE ACTION CORRECTIVE ACTIONS CREDIT BANK CREDIT MARKETS CREDIT RATIONING CREDIT RISK CREDIT SPREAD CROSS-BORDER BANKING DEBT DEFAULT PROBABILITIES DEFAULT PROBABILITY DEFAULT RISK DEFAULT RISKS DEFAULTS DEPOSIT DEPOSIT INSURANCE DEPOSITS DERIVATIVE PRODUCTS DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT BANK DISCLOSURE REQUIREMENTS DIVIDEND DOMESTIC BANK DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC SHOCKS ECONOMIES OF SCALE EMERGING MARKET EQUITY HOLDERS EQUITY RATIO EQUITY RETURNS EQUITY VALUE ESTATE EVENT OF DEFAULT FACE VALUE FACE VALUE OF DEBT FEDERAL RESERVE FINANCIAL CONTRACTS FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL INTERMEDIATION FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL STUDIES FOREIGN BANK FOREIGN BANK PARTICIPATION FOREIGN BANKS HOLDING HOLDING COMPANIES HOLDINGS HOST COUNTRIES HOST COUNTRY IMPLIED VOLATILITIES IMPLIED VOLATILITY INCOME STATEMENT INDEPENDENT BANKS INSOLVENCY INSURANCE INTEREST RATE INTEREST RATE DATA INTEREST RATE SPREAD INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANK LENDING INTERNATIONAL BANKING INTERNATIONAL BANKS INTERNATIONAL FINANCIAL SYSTEM INTERPOLATION INVESTMENT REGULATIONS ISLAMIC BANK JURISDICTIONS LARGE BANKS LEGAL ENTITIES LEVERAGE LIMITED LIQUID ASSETS LIQUIDITY RISK LOAN LOAN CLASSIFICATION LOAN LOSS LOAN LOSS PROVISIONS LTD. MARKET EQUITY MARKET INFORMATION MARKET VALUE MARKET VALUE OF EQUITY MONETARY FUND MULTINATIONAL MULTINATIONAL BANK MULTINATIONAL BANKS MUTUAL FUND MUTUAL FUND INDUSTRY NONPERFORMING LOANS POLITICAL ECONOMY PROBABILITY OF BANKRUPTCY PROBABILITY OF DEFAULT PROFITABILITY PROXY PUBLIC BANKS REAL ESTATE RECESSIONS REGULATORY AUTHORITIES REGULATORY REGIME REGULATORY REGIMES REGULATORY SYSTEM RESERVE RESERVE REQUIREMENT RESERVE REQUIREMENTS RESERVES RESTRICTIONS ON BANK ACTIVITIES RETURN RISK CONTROL RISK PROFILES RISK WEIGHTED ASSETS RISK-FREE RATE SECURITIES SHARE OF BANK ASSETS SOCIAL DEVELOPMENT SOLVENCY STOCK MARKET STOCK MARKET PRICES STOCK MARKETS STOCK RETURN SUBSIDIARIES SUBSIDIARY SUPERVISION OF BANKS SUPERVISORY AUTHORITIES SUPERVISORY POWERS SYSTEM ASSETS SYSTEMIC RISK TREASURY TREASURY YIELD UNION USE OF DERIVATIVE VALUE OF ASSETS WHOLESALE FUNDING 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. 2014-11-12T21:35:42Z 2014-11-12T21:35:42Z 2014-10 http://documents.worldbank.org/curated/en/2014/10/20261594/foreign-bank-subsidiaries-default-risk-during-global-crisis-factors-help-insulate-affiliates-parents http://hdl.handle.net/10986/20517 English en_US Policy Research Working Paper;No. 7053 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research

Foreign Bank Subsidiaries' Default Risk During the Global Crisis : What Factors Help Insulate Affiliates from Their Parents?

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