2019 Financial Stability Conference: Financial Stability: Risks, Resilience, and Policy | Halle Institute for Economic Research (IWH) | 21 November 2019 | Federal Reserve Bank of Cleveland, 1455 E 6th St, Cleveland, OH 44114, USA

The financial crisis has revealed the urgent need to better understand the determinants and consequences of cross-border banking. International banking has been driven both, by the globalization of economic activity, and by the deregulation of financial markets. It can have positive implications for economic welfare through an improved allocation of capital and enhanced possibilities for risk-sharing across countries. However, activities of internationally active banks can also be more risky than those of domestic banks, and it can be a source of systemic risk.

Against this background, a rich new research agenda has emerged, which aims at assessing the drivers of international banking. This research shows that using aggregated or bilateral country-by-country data is not sufficient to analyze the causes and effects of cross-border banking. Rather, micro data are needed that allow shedding light at the cross-border linkages of individual banks and at intra-bank, cross-border banking structures. Many key policy questions such as the response of banks to country-specific, macroprudential policies such as counter-cyclical capital buffers, and the cross-border resolution of banks require such information.