Advanced Search
MyIDEAS: Login

Funding Costs and Loan Pricing by Multinational Bank Affiliates

Contents:

Author Info

  • Alexis Derviz
  • Marie Rakova

Abstract

We conduct a theoretical and empirical investigation of the influence which the financial condition of a multinational bank group may have on the lending rates of its affiliates. We first propose a model of bank lending to risky clients in which the implicit opportunity costs of lending by a foreign bank affiliate are influenced by the abundance/scarcity of funds within the multinational conglomerate. The model predicts that parent banks’ influence should be stronger in loan segments with more pronounced information asymmetry problems. We then formulate an empirical model of the spread charged by the affiliate to clients over the local interbank rate as a function of affiliate-level controls and a parent influence variable. This model is tested for three categories of commercial non-financial borrowers (domestically owned firms, foreign-owned firms and the self-employed) from the ten biggest banks in the Czech Republic under foreign control. Evidence of parent influence on lending spread is found in a limited number of cases of banks and borrower classes for which the constraint on fund flow within the parent bank group is likely to be tight, particularly when the borrower class is of strategic importance for the affiliate’s overall performance. Therefore the parent bank influence probably is not a dominating factor in interest-rate setting on aggregate, but it can influence the cost of credit in borrower categories that are of major importance for the affiliate.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2009_09.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2009/9.

as in new window
Length:
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:cnb:wpaper:2009/9

Contact details of provider:
Postal: Na Prikope 28, 115 03 Prague 1
Phone: 00420 2 2442 1111
Fax: 00420 2 2421 8522
Email:
Web page: http://www.cnb.cz/en/research/research_intro/
More information through EDIRC

Related research

Keywords: Bank loan pricing; internal capital market; multinational banks.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Alexis Derviz & Jiri Podpiera, 2006. "Cross-Border Lending Contagion in Multinational Banks," Working Papers 2006/9, Czech National Bank, Research Department.
  2. De Haas, Ralph & van Lelyveld, Iman, 2009. "Internal Capital Markets and Lending by Multinational Bank Subsidiaries," MPRA Paper 13164, University Library of Munich, Germany.
  3. Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Alexis Derviz & Marie Raková, 2012. "Parent Influence On Loan Pricing By Czech Banks," Prague Economic Papers, University of Economics, Prague, vol. 2012(4), pages 434-499.
  2. repec:prg:jnlpep:v:2013:y:2013:i:4:id:433:p:434-499 is not listed on IDEAS

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cnb:wpaper:2009/9

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Babecky).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.