Philippine Standard time

What Drives Cross-Border Bank Flows?


This paper examines the drivers and impact of cross-border bank financial positions in a destination emerging market economy (the Philippines) for global banks using a unique dataset of disaggregated data for 55-58 internationally active banks during the period 2015 to 2020. The data allow us to analyze the cross-border asset position of banks in the destination country, as well as the cross-border liabilities, thus going beyond the traditional focus on cross-border liabilities only. We find that global risk appetite, real exchange rate movements, return on assets, and the spread between the domestic policy rate and the US Fed funds rate influence cross-border financial positions. We also find, apparently for the first time in this type of study, that the domestic credit cycle for banks in the destination country affects the cross-border asset position of banks. This effect is stronger in foreign banks. A separate analysis of how cross-border financial positions affect the domestic credit cycle reveals that these have a significant positive impact on all banks.


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