Banks’ Foreign Credit Exposures and Borrowers’ Rollover Risks Measurement, Evolution and Determinants

Abstract

The recent crises highlighted the role of cross-border banking linkages. This paper proposestwo new measures for better capturing creditor banking systems' foreign credit exposuresand borrower countries' reliance on foreign bank credit, by combining BIS data with bankleveldata. The results indicate that the proposed refinements matter, especially when foreignbank affiliates' funding relies heavily on local deposits. In addition, after developing noveland necessary break-in-series and exchange rate variation adjustments, estimations looking atthe driving factors of both measures during 2006-2012 highlight: (i) the role of systemicbanking crises and global financial conditions in the evolution of banks' foreign creditexposures; (ii) the role of a larger set of factors in the case of the evolution of borrowercountries' reliance on foreign bank credit—how countries borrowed, from whom theyborrowed, and global financial and domestic demand conditions.