This paper provides a framework for the joint explanation of the Global Financial Cycle and Global Imbalances. I propose a tractable multi-country model in which leverage-constrained global banks intermediate funds among local banks with heterogeneous project returns. Following a relaxation of their constraint, global banks reallocate more funds, generating both higher gross capital inflows and outflows at the country-specific and global levels. I show, both theoretically and empirically, that countries with higher net external liabilities against global banks experience a larger deterioration in their current account balance, driven by a larger increase in investment, after a leveraging up by global banks. Empirically, a unit standard deviation increase in the leverage of global banks leads on average to a lower current account balance by 0.9% GDP over a quarter in Portugal, a debtor country, while it leads to a higher current account balance by 0.2% GDP in Israel, a creditor country on global banks. As such, fluctuations in global banks’ leverage also play a key role in driving global external imbalances.