||A model of international banking, with the stress on the specific management human capital (borrower monitoring) and the majority shareholder human capital (manager auditing) is used to study the effects of exogenous shocks in one country on credit creation in the other. I show that the presence of the two named categories of non-transferable skills in the banking technology reduces the role of the standard portfolio diversification motive for cross-border transmission of disturbances. At the same time, this bank-specific market friction creates a separate channel of shock propagation, a function of the bank shareholder and manager incentives. It can even happen that the exogenous shock impact on credit has a different sign in the “relationship“ as opposed to “arm’s length“ banking environment. This phenomenon, caused by the marginal effect of the manager human capital involvement in the bank operation, is present in the bank branches with relatively small loan volumes. When the loan volume is large, the direction of the manager-auditing bank reaction to shocks abroad is the same as that of an arm’s length lender.