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Freeze! Financial Sanctions and Bank Responses

Author

Listed:
  • Matthias Efing
  • Stefan Goldbach
  • Volker Nitsch
  • Manju Puri

Abstract

Using regulatory data, we study German bank lending in countries targeted by financial sanctions. We find that domestic banks in Germany reduce lending in sanctioned countries, whereas their foreign bank affiliates outside Germany increase lending. In some cases, this is because the bank affiliates’ host countries have not imposed sanctions themselves. However, even German bank affiliates in host countries that enact sanctions like Germany increase lending if these host countries lack strong institutions and anticrime policies. These findings suggest that even universally adopted sanctions distort bank capital flows and competition if the level of their enforcement varies across bank locations.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Suggested Citation

  • Matthias Efing & Stefan Goldbach & Volker Nitsch & Manju Puri, 2023. "Freeze! Financial Sanctions and Bank Responses," The Review of Financial Studies, Society for Financial Studies, vol. 36(11), pages 4417-4459.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:11:p:4417-4459.
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    References listed on IDEAS

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    8. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 2007. "Economic Sanctions Reconsidered, 3rd edition (hardcover)," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4075, January.
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    Cited by:

    1. Lastauskas, Povilas & Proškutė, Aurelija & Žaldokas, Alminas, 2023. "How do firms adjust when trade stops?," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 287-307.
    2. Gutmann, Jerg & Neuenkirch, Matthias & Neumeier, Florian, 2023. "The economic effects of international sanctions: An event study," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1214-1231.
    3. Tibor Besedeš & Stefan Goldbach & Volker Nitsch, 2024. "Smart or smash? The effect of financial sanctions on trade in goods and services," Review of International Economics, Wiley Blackwell, vol. 32(1), pages 223-251, February.
    4. Michelle Lowry, 2024. "The questions being asked: Academic research, the media, and regulators," The Financial Review, Eastern Finance Association, vol. 59(3), pages 549-560, August.
    5. Anirudh Shingal, 2023. "Sanctions and services trade: the neglected dimension," RSCAS Working Papers 2023/39, European University Institute.

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    More about this item

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K3 - Law and Economics - - Other Substantive Areas of Law

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