Foreign banks, corporate strategy and financial stability: lessons from the river plate

Pre-print, Working paper: This paper analyzes the risk taking of branches and subsidiaries of international bank holding institutions from the perspective of host country regulators in two Latin American financial systems: Argentina and Uruguay. Using both theory and empirics, we analyze differences in the risk attitudes of these institutions in the run up to the major financial crises of 2001-02. The empirical part of this paper is based on a rich bank-level dataset on corporate structures, balance sheets, and ownership of banks. We find that foreign banks branches have taken on fewer risks than subsidiaries and relate this to differences in the legal responsibility of parent banks. This research not only shows original results concerning banks corporate strategies in the face of country risk, but also contributes to the debate on appropriate banking regulation.

Author(s)

Michael Brei, Carlos Winograd

Date of publication
  • 2012
Keywords
  • Financial Crises
  • Argentina
  • Uruguay
  • Bank Corporate
Internal reference
  • PSE Working Papers n°2012-26
Version
  • 1