By using country-level data on the foreign affiliates of U.S. global banks in 20 developed and 60 emerging economies from 2006 to 2013, we present consistent evidence that liquidity shocks triggered by a global financial crisis are transmitted to affiliate locations that are important for the parent bank funding sources within the banking group. We find that the funding location of global banks is driven by affiliates' dependence on local deposit funding, by host country-specific characteristics (financial liberalization), and by foreign affiliate-specific characteristics (liquidity constraints). As a result of foreign affiliates' support to their parent banks, funding location may suffer internal capital outflows during a financial crisis. We conclude that internal capital outflows are confined to local funding affiliates with sufficient liquidity operating in fully liberalized financial systems. These results indicate that contrary to the findings of Cetorelli and Goldberg (2012), foreign affiliates financed by local deposits rather than a parent bank's resources were not necessarily a significant source of internal capital outflows from the host country during the global financial crisis. Hence, the benefits of local funding can be achieved without its cost if either high liquidity constraints or low financial liberalization is in place.