FLARblog | What Drives Banks’ Responses to Global Monetary Shocks: Ownership or Balance Sheets?

When the U.S. Federal Reserve changes interest rates, which banks transmit those shocks more strongly to the rest of the world? Conventional wisdom suggests foreign-owned banks should be more sensitive because they belong to multinational banking groups. Our evidence, based on more than 2,000 banks across 116 countries, suggests a different conclusion: ownership alone is not a reliable predictor of how international monetary shocks affect bank lending.