This study provides empirical evidence on whether foreign bank ownership linkages can transmit external liquidity shocks. The past two decades has witnessed extensive globalisation of the financial sector. Banks from one country to the next are increasingly connected by cross-border interbank lending relationships and ownership ties. Additionally, there has been a large increase in the presence of foreign-owned banks in a typical domestic banking system. The overall share of domestic banking assets held by foreign banks has increased from 15% in 1995 to 23% in 2005 (International Monetary Fund, 2007). As a result, the role of foreign banks and foreign-owned domestic banks in the banking system has become more important, in both developed countries and emerging markets. Yet the implications of increasing foreign banks are not well understood in literature. On one hand, access to foreign banking capital may intensify the competition of the domestic banking sector, thereby stimulating financial innovation, and the efficiency of domestic companies (Claessens et al., 2001; Sturm and Williams, 2004). Such ‘spillovers’ can help establish a modern financial system in developing countries and led to better financial regulations (Lensink and Hermes, 2004). On the other hand, a large proportion of foreign owned banks in the domestic banking system could increase a country’s exposure to an international liquidity shock. If so, micro-prudential policies should be designed in order to limit the potential contagion so that the financial stability of the domestic banking system is preserved. The European sovereign debt crisis that began in 2010 provides an excellent quasi-natural experiment to test possible contagion effects. This shock generated a liquidity crisis in Greece, Ireland, Italy, Portugal, Spain (GIIPS). We show how this shock was propagated to the other European countries through ownership linkages of banks and their subsidiaries. The contribution of this paper is twofold. First, our paper provides cross-country bank-level evidence that liquidity shocks from certain countries could be transmitted to other countries through bank ownership linkages. Papers in the literature have explored shocks from a single country (Peek and Rosengren, 2000),