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Foreign Bank Penetration and Bank Credit Stability in Central and Eastern Europe

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  • R.T.A. de Haas
  • I. van Lelyveld

Abstract

We analyse the development of foreign bank penetration in Central and Eastern Europe (CEE) and its influence on the stability of bank credit. We measure both cross-border credit and activities of foreign bank subsidiaries within CEE. By combining BIS statistics and BankScope data into a unique database we are able to make a clear distinction between these two kinds of activities. Our analysis shows that the relative importance of foreign bank subsidiaries in CEE has increased considerably during recent years. However, in Estonia, Hungary and Poland foreign banks were also important during the first transition years, as they provided substantial amounts of cross-border credit. We do not find evidence of foreign banks deserting CEE, e.g. during adverse economic times. Although cross-border credit did decrease during some periods, our results show that foreign banks acquired new local subsidiaries or expanded the credit supply of existing subsidiaries at the same time.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Directorate Supervision in its series Research Series Supervision (discontinued) with number 43.

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Date of creation: Mar 2002
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Handle: RePEc:dnb:ressup:43

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Keywords: foreign banks; cross-border credit; transition economies; financial stability;

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References

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  1. Joe Peek & Eric S. Rosengren, 1996. "The International Transmission of Financial Shocks: The Case of Japan," Boston College Working Papers in Economics 357, Boston College Department of Economics.
  2. Fernando J. Cardim de Carvalho, 2000. "New competitive strategies of foreign banks in large emerging economies: the case of Brazil," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 53(213), pages 135-169.
  3. Jennifer S. Crystal & B. Gerard Dages & Linda S. Goldberg, 2002. "Has foreign bank entry led to sounder banks in Latin America?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 8(Jan).
  4. Linda Goldberg & B. Gerard Dages & Daniel Kinney, 2000. "Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina," NBER Working Papers 7714, National Bureau of Economic Research, Inc.
  5. Claessens, Stijn & Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "How does foreign entry affect the domestic banking market?," Policy Research Working Paper Series 1918, The World Bank.
  6. Nancy L. Wagner & Dora M. Iakova, 2001. "Financial Sector Evolution in the Central European Economies:Challenges in Supporting Macroeconomic Stability and Sustainable Growth," IMF Working Papers 01/141, International Monetary Fund.
  7. McKinnon, Ronald I & Pill, Huw, 1997. "Credible Economic Liberalizations and Overborrowing," American Economic Review, American Economic Association, vol. 87(2), pages 189-93, May.
  8. Cludia M. Buch, 1997. "Opening up for foreign banks: How Central and Eastern Europe can benefit," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(2), pages 339-366, November.
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Citations

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Cited by:
  1. H. Brouwer & R. de Haas & B. Kiviet, 2002. "Banking sector development and financial stability in the run up to EU accession," MEB Series (discontinued) 2002-6, Netherlands Central Bank, Monetary and Economic Policy Department.
  2. Ilko Naaborg & Bert Scholtens & Jakob de Haan & Hanneke Bol & Ralph de Haas, 2003. "How Important are Foreign Banks in the Financial Development of European Transition Countries?," CESifo Working Paper Series 1100, CESifo Group Munich.
  3. J.W.B. Bos, 2003. "Improving Market Power Tests: Does it matter for the Dutch Banking Market?," Research Series Supervision (discontinued) 56, Netherlands Central Bank, Directorate Supervision.
  4. Hanneke Bol & Jakob de Haan & Bert Scholtens & Ralph de Haas, 2002. "How Important Are Foreign Banks in European Transition Countries? A Comparative Analysis," International Finance 0209005, EconWPA.
  5. Henk Brouwer & Ralph de Haas & Bas Kiviet, 2002. "Banking sector development and financial stability in the run up to EU accession," Macroeconomics 0209003, EconWPA.

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