Global Banks’ Dollar Funding: A Source of Financial Vulnerability

Global Banks’ Dollar Funding: A Source of Financial Vulnerability
Author :
Publisher : International Monetary Fund
Total Pages : 50
Release :
ISBN-10 : 9781513549149
ISBN-13 : 1513549146
Rating : 4/5 (146 Downloads)

Book Synopsis Global Banks’ Dollar Funding: A Source of Financial Vulnerability by : Mr.Adolfo Barajas

Download or read book Global Banks’ Dollar Funding: A Source of Financial Vulnerability written by Mr.Adolfo Barajas and published by International Monetary Fund. This book was released on 2020-07-03 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Leading up to the global financial crisis, US dollar activity by global banks headquartered outside the United States played a crucial role in transmitting shocks originating in funding markets. Although post-crisis regulation has improved banking systems’ resilience, US dollar funding remains a global vulnerability, as evidenced by strains that reemerged in March 2020 in the midst of the COVID-19 crisis. We show that shocks to US dollar funding costs lead to financial stress in the home economies of these global non-US banks, and to spillovers to borrowers, especially emerging economies. US dollar funding vulnerability amplifies these negative effects, while some policy-related factors act as mitigators, such as swap line arrangements between central banks and international reserve holdings. Thus, these vulnerabilities should be monitored and, to the extent possible, controlled.


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