The Bank for International Settlements published a working paper examining how major geopolitical events affect international bank credit using confidential BIS banking statistics covering 1977–2024. It finds that greater geopolitical distance is associated with weaker cross-border banking activity and that adverse shocks lead to a materially larger contraction in credit between geopolitical blocs than within blocs, while positive geopolitical developments do not generate a comparable rebound in cross-border bank credit. Using gravity-model benchmarks on bilateral credit links across up to 12,000 country pairs, the paper studies episodes including the Soviet invasion of Afghanistan, the fall of the Berlin Wall, the annexation of Crimea and the invasion of Ukraine. Negative events are associated with a 10–20% larger decline in credit between blocs than within blocs, and UN voting-based measures of geopolitical distance are linked to markedly lower bilateral credit. Results are triangulated across BIS locational and consolidated banking statistics and syndicated loan data, with evidence that cross-border and contingent exposures are more sensitive than lending booked by local affiliates. The paper attributes the asymmetric response of banking versus trade to the higher level of trust and longer-term commitment embedded in bank credit.
Bank for International Settlements 2026-03-20
Bank for International Settlements study finds geopolitical tensions depress cross-border bank credit with slower recovery than trade
The Bank for International Settlements released a working paper analyzing the impact of major geopolitical events on international bank credit from 1977 to 2024. The study finds that geopolitical distance weakens cross-border banking activity, with negative events causing a 10–20% larger decline in credit between geopolitical blocs than within them. Cross-border and contingent exposures are more sensitive to geopolitical shocks than local affiliate lending.