The exposure of international bank loans to third-country risk: an empirical analysis of overdue claims

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 31 December 2004

Working Paper No. 247 
By Drew Dahl and Andrew Logan

The paper analyses the performance outcomes on foreign credits made by UK-owned banks to borrowers in 17 foreign countries between 1991 and 2000. The analysis is unique in its use of bank-specific data on overdue credits in individual countries. Results indicate that credit repayment in a given country is influenced by exports to, and economic activity in, another country linked by trading relationships. The observed cross-country interdependence is relevant to the understanding of risk management practices of international banks.

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