Credits between Banks

Abstract

The recent global financial crisis raised questions on the stability and the functioning of the banking and financial system. By analyzing the data of global loans among European banks during the bubble, the financial crisis and the sovereign debt crisis, we show that the credit relationships between banks belonging to the so called PIIGS countries (i.e. Greece, Portugal, Ireland and Spain) and those of the non-PIIGS countries (i.e. Germany, Belgium, Holland, Austria and France) changed a lot during those periods. The data shows that the volume of loans granted from the "non-PIIGS" banks to the "PIIGS" financial institutions significantly decreased with the arrival of the financial crisis. However, surprisingly, our empirical analysis findes an increasing volume of loans among the PIIGS institutions, suggesting that poor countries are trying to help themselves in periods of instability. Our results derive from the statistical and econometric analysis performed on BIS data running from 2006 to 2013.