Rue de la Banque no. 18: The transmission of liquidity risk through international banks

This Rue de la Banque presents the results for France of the first research project undertaken by the International Banking Research Network (IBRN). This project focuses on periods of financial stress, which are traditionally characterised by lower bank lending, especially for international lending. Results suggest that greater dependence on stable funding or liquidity provisions can be associated with higher lending growth. The negative effects of financial stress periods on bank lending are mitigated when banks have access to public liquidity. The quantitative importance of liquidity risk is more pronounced for foreign lending, which suggests that French banks’ business model and the strong domestic retail sector contribute to the stability of domestic credit.