{"id":20588,"date":"2014-10-16T05:55:42","date_gmt":"2014-10-16T03:55:42","guid":{"rendered":"http:\/\/www.w-t-w.org\/en\/?p=20588"},"modified":"2014-10-16T06:13:02","modified_gmt":"2014-10-16T04:13:02","slug":"20588","status":"publish","type":"post","link":"https:\/\/www.w-t-w.org\/en\/20588\/","title":{"rendered":"Domestic Banks Face Different Challenges than Global Banks"},"content":{"rendered":"

Economists at the New York Federal Reserve write: Large global U.S. banks\u2014that is, those that have offices in foreign countries and are able to move liquidity from affiliates across borders have an advantage over large domestic U.S. banks, which have to rely on financing<\/a> raised in capital markets and from depositors to extend credit and issue loans..\u00a0 The internal liquidity management by global banks has, on average, mitigated the effects of aggregate liquidity shocks on domestic lending by these banks.<\/p>\n

If a bank has stable deposit funding or maintains more liquid assets on its balance sheet, its lending might be less affected by aggregate liquidity shocks.<\/p>\n

There also might be different responses to liquidity risk by U.S. banks that are domestically oriented compared with banks that are global. \u00a0 Because these two types of banks have very different business models, the channels and magnitude of transmission of liquidity risks into bank lending may differ significantly. Small domestic banks have relatively strong lending responses to liquidity risks.\u00a0 By contrast, banks with foreign affiliates, particularly large banks, move funds a<\/a>cross their organizations to offset such risks, and potentially insulate lending in their home markets.\u00a0 However, these same banks may decrease lending abroad as they move liquidity into their home country.<\/p>\n

For both types of banks, changes in aggregate private liquidity are likely to influence lending differently in crisis than in normal periods, in part because of the availability of and willingness to use official sector liquidity facilities in periods of aggregate liquidity stress. When banks have access to central bank liquidity facilities priced at terms below private market rates, this might relax the constraints imposed by the composition of banks\u2019 balance sheets on their access to external funding, leading to a different relationship between those balance sheet characteristics and the banks\u2019 lending,\u00a0 I<\/a>s Liquidity a Measure of Stability<\/strong>
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Economists at the New York Federal Reserve write: Large global U.S. banks\u2014that is, those that have offices in foreign countries and are able to move liquidity from affiliates across borders have an advantage over large domestic U.S. banks, which have … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[70,13,21,18],"tags":[],"class_list":["post-20588","post","type-post","status-publish","format-standard","hentry","category-big-banks","category-finance","category-financial-literacy","category-news-blog"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t