TY - JOUR AU - Kleymenova, Anya AU - Rose, Andrew K AU - Wieladek, Tomasz TI - Does Government Intervention Affect Banking Globalization? JF - National Bureau of Economic Research Working Paper Series VL - No. 21981 PY - 2016 Y2 - February 2016 DO - 10.3386/w21981 UR - http://www.nber.org/papers/w21981 L1 - http://www.nber.org/papers/w21981.pdf N1 - Author contact info: Anya V. Kleymenova Federal Reserve Board of Governors 20th St and Constitution Ave. Stress Testing Research Washington, DC 20551 United States Tel: 7734908768 E-Mail: anya.kleymenova@frb.gov Andrew K. Rose Business School National University of Singapore 15 Kent Ridge Drive Singapore 119245 Tel: +65 6516-3075 Fax: +65 6779-1365 E-Mail: bizdean@nus.edu.sg Tomasz Wieladek 5 The North Colonnade Canary Wharf London E14 4BB United Kingdom E-Mail: tomaszwieladek@gmail.com M1 - published as Anya Kleymenova, Andrew Rose, Tomasz Wieladek. "Does Government Intervention Affect Banking Globalization?," in Kosuke Aoki, Shin-ichi Fukuda, Takeo Hoshi, and Takashi Kano, organizers, "International Finance in the Global Markets" Elsevier, Journal of the Japanese and International Economies, volume 42 (2016) AB - Using data from British and American banks, we provide empirical evidence that government intervention affects banking globalization along three dimensions: depth, breadth and persistence. We examine depth by studying whether a bank’s preference for domestic, as opposed to external, lending (funding) changes when it is subjected to a large public intervention, such as bank nationalization. Our results suggest that, following nationalization, non-British banks allocate their lending away from the UK and increase their external funding. Second, we find that nationalized banks from the same country tend to have portfolios of foreign assets that are spread across countries in a way that is far more similar than either private banks from the same country or nationalized banks from different countries, consistent with an impact on the breadth of globalization. Third, we study the Troubled Asset Relief Program (TARP) to examine the persistence of the effect of large government interventions. We find weak evidence that upon entry into the TARP, foreign lending declines but domestic does not. This effect is observable at the aggregate level, and seems to disappear upon TARP exit. Collectively, this evidence suggests that large government interventions affect the depth and breadth of banking globalization, but may not persist after public interventions are unwound. ER -