Feyen, ErikGonzález del Mazo, Inés2013-04-122013-04-122013-03https://hdl.handle.net/10986/13188This paper assesses European bank deleveraging and its impact on global credit conditions. Before the onset of the global financial crisis, European banks had rapidly expanded their foreign lending activities. However, European banks have since been tightening credit conditions in Europe more for longer-term lending, a trend that banks expect to continue. European financial stress has been transmitted to emerging markets that have experienced a sustained deterioration of credit standards and funding conditions. As a result, European lending in emerging markets has been lagging behind lending of other international banks although European banks remain a dominant source of funding. "Good" bank deleveraging is still necessary from a prudential perspective. Although acute "bad" deleveraging pressures due to financial stress, which can trigger a credit crunch, have subsided recently on account of decisive policy measures, tail risks remain. Curtailing lending will probably be a core component of this multi-year deleveraging process. Taken together, European bank deleveraging warrants close attention.en-USCC BY 3.0 IGOACCOUNTINGADVANCED ECONOMIESAFFILIATESAMOUNT OF CAPITALAPRASSET DISPOSALSASSET MANAGEMENTASSET MANAGEMENT COMPANIESASSET QUALITYASSET SALESBALANCE SHEETBALANCE SHEETSBANK ACTIVITIESBANK ASSETBANK ASSET QUALITYBANK ASSETSBANK CREDITBANK DEBTBANK FINANCINGBANK FOR INTERNATIONAL SETTLEMENTSBANK LENDINGBANK LOANBANKING AUTHORITYBANKING CORPORATIONBANKING SECTORBANKING SECTORSBANKING SYSTEMBANKING SYSTEMSBANKING UNIONBANKSBOND MARKETSBONDSBORROWINGBUY BACKCAPITAL FLOWSCAPITAL GAINCAPITAL MARKETCAPITAL MARKETSCAPITAL REQUIREMENTSCENTRAL BANKSCOLLATERALCOLLATERAL REQUIREMENTSCONSUMER LENDINGCORE DEPOSITSCREDIT AGENCYCREDIT CRUNCHCREDIT FLOWSCREDIT GROWTHCREDIT TERMSCROSS-BORDER FLOWSCURRENCY COMPOSITIONDEBTDEBT CRISISDEBT ISSUANCEDEBT MARKETSDEBT REDUCTIONDEMAND FOR CREDITDEPENDENTDEPOSITDEPOSIT INSURANCEDEPOSITORY INSTITUTIONSDEPOSITSDEVELOPING COUNTRIESDISCRETIONARY POWERSDISINTERMEDIATIONDIVIDENDSDOMESTIC CREDITDOMESTIC FINANCIAL MARKETSDOMESTIC MARKETSECONOMIC ACTIVITYECONOMIC CONDITIONSECONOMIC GROWTHECONOMIC POLICIESECONOMICSEMERGING CREDITEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSEQUITY RATIOEUROPEAN CENTRAL BANKFINANCIAL CORPORATIONSFINANCIAL CRISESFINANCIAL CRISISFINANCIAL INSTABILITYFINANCIAL INSTITUTIONSFINANCIAL INTEGRATIONFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL SHOCKSFINANCIAL STABILITYFINANCIAL STRESSFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCIERSFORBEARANCEFOREIGN BANKFOREIGN BANKSFOREIGN CAPITALFOREIGN CLAIMSFOREIGN EXCHANGEFUNDING SOURCEFUNDING SOURCESGLOBAL ECONOMYGLOBAL FINANCIAL STABILITYGOVERNMENT DEBTGROSS DOMESTIC PRODUCTHOME MARKETSHOST COUNTRIESHOST ECONOMIESHOUSEHOLDSINSOLVENCYINSOLVENCY RISKSINSTRUMENTINSURANCEINTEREST RATEINTERNATIONAL BANKINTERNATIONAL BANKINGINTERNATIONAL BANKSINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL INTEGRATIONINTERNATIONAL FINANCIAL SYSTEMINVESTMENT BANKSINVESTMENT OPPORTUNITIESINVESTOR DEMANDKEY CHALLENGELARGE FIRMSLENDERLENDERSLENDING CONDITIONSLEVERAGELIABILITYLIABILITY SIDELIQUID ASSETSLIQUIDITYLIQUIDITY POSITIONSLIQUIDITY SUPPORTLOANLOAN MARKETLOAN MATURITIESLOAN PORTFOLIOSLOAN SIZELOAN VOLUMESLOAN-TO-DEPOSIT RATIOSLOCAL CURRENCYLONG-TERM ASSETSLONG-TERM FINANCELONG-TERM LENDINGLONG-TERM LOANLONG-TERM LOANSLOW INTEREST RATEMARKET CONDITIONSMARKET CONFIDENCEMARKET FINANCEMARKET RISKMARKET RISKSMARKET SHAREMARKET SHARESMATURITIESMATURITYMATURITY STRUCTUREMONETARY FUNDMONEY MARKETMORTGAGEMORTGAGESPOLICY RESPONSEPRIVATE CREDITPRIVATE FUNDINGPROFITABILITYPROJECT FINANCINGPROVISION OF CREDITRECAPITALIZATIONRECIPIENT COUNTRIESREGULATORY FRAMEWORKREGULATORY REFORMSRESERVERESERVE REQUIREMENTSRESERVESRETAINED EARNINGSRETURNSRISK MEASUREMENTRISK PREMIASAFE ASSETSSECURITIESSHARE OF BANK ASSETSSOLVENCYSOVEREIGN BONDSOVEREIGN BOND MARKETSSOVEREIGN DEBTSOVEREIGN DEBT MARKETSSOVEREIGN RISKSSOVEREIGN YIELDSSUBSIDIARIESSUPPLY CHAINSUPPLY OF CREDITSWAPTANGIBLE ASSETSTAXTERM CREDITTRADE FINANCETRADE FINANCINGTRADE FLOWSTRADINGUNIONUNSECURED DEBTVALUATIONSWARRANTSWHOLESALE FUNDINGWITHDRAWALWorld Bank10.1596/1813-9450-6388