Following recent crises, cross-border capital flows have declined considerably, and many advanced countries’ banks are retrenching. At the same time, banks from emerging and developing countries continue to expand abroad, and banking has become more regional. Research highlights that long-term debt flows are less volatile and that foreign banks with larger presence, more domestic funding, and closer relationships provide more finance and share risks better. While ongoing changes in global banking influence its overall benefits, the crises also revealed the need for a consistent framework for supervising and resolving globally active banks, with the European Banking Union an important model.

International banks greatly reduced direct cross-border and local affiliates’ lending as the global financial crisis strained their balance sheets, lowered borrower demand, and altered government policies. Using bilateral lender–borrower data and controlling for demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with financial statements’ and lender–borrower data playing minor roles. Those banking systems subject to less market discipline, however, were less sensitive to markets’ perceptions. Moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differed from those for local affiliates’ lending, especially for more impaired banking systems.

Using a recent IMF survey and expanding on previous studies, we document the use of macroprudential policies for 119 countries over the 2000–2013 period, covering many instruments. Emerging economies use macroprudential policies most frequently; especially foreign exchange related ones while advanced countries use borrower-based policies more. Usage is generally associated with lower growth in credit, notably in household credit. Effects are less in financially more developed and open economies, however, and usage comes with greater cross-border borrowing, suggesting some avoidance. And while macroprudential policies can help manage financial cycles, they work less well in busts.