Foreign Bank Lending in the U.S. During Three U.S. Recessions

Anoop Rai, Rama Seth, Sunil K. Mohanty*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

We study whether foreign banks engaged in countercyclical lending in the United States during the 1990–1991, 2001, and 2007–2009 recessions. Aggregate lending by foreign banks increased in the 1990–91 recession and by domestic banks in the 2001 recession. Controlling for local GDP and unemployment, we show countercyclical lending by foreign branches in the 1990 recession and by foreign subsidiaries in the 2001 recession. In the 2008 recession, foreign branches and subsidiaries exhibited neither countercyclical nor procyclical lending. We conclude that foreign banks like domestic banks respond to local economic conditions; the foreign ownership is not a factor.
Original languageEnglish
JournalGlobal Finance Journal
Number of pages15
ISSN1044-0283
DOIs
Publication statusPublished - 8 May 2020

Bibliographical note

Epub ahead of print. Published online: 8 May 2020

Keywords

  • Bank regulation
  • Countercyclical lending
  • Foreign banks

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