The dark and bright sides of global banking: a (somewhat) cautionary tale from emerging Europe

This paper reviews the literature on the benefits and risks of global banking, with a focus on emerging Europe. It argues that while the potential destabilising impact of global banks was well understood before the 2008-09 financial crisis, the sheer magnitude of this impact in the case of systemically relevant foreign bank subsidiaries was under-appreciated. A second lesson from the crisis is that banks’ funding structure, in particular the use of short-term wholesale funding, matters as much for lending stability as does their ownership structure.