Freeze! Financial Sanctions and Bank Responses

Mardi | 2021-11-30
16h – Salle des thèses


When one country imposes financial sanctions against another country, its domestic banks must end business relations with targeted counterparties. Based on regulatory data, we show that banks domiciled in Germany reduce lending in countries targeted by German sanctions. However, German bank subsidiaries and branches domiciled abroad increase their positions in the sanctioned countries by 44% relative to their parent banks at home. This incremental effect increases to 95% for German bank affiliates domiciled in countries with weak policies against financial crime and is independent of whether these countries with weak anti-crime policies have formally enacted the sanctions themselves.