While foreign-owned banks, the world over, generally contributed to the liquidity crunch in the context of deleveraging during the crisis, the emerging Europe with heavy  2  www.voxeu.org. BIS Review 24/2010  3  dependence on foreign banking groups was particularly exposed, culminating in the Initiative for Coordination of European Banks to induce parent banks to maintain exposures to their subsidiaries.
As chronicled by the BIS Annual Report, 2009, countries such as Hungary, Indonesia, Mexico and Turkey faced huge problems when there were sudden reversals in foreign investment in local bond market. Such volatile flows can exacerbate the situation merely through the confidence channel.