Foreign Bank Penetration and Bank Credit Stability in Central and Eastern Europe
AbstractWe 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 InfoPaper provided by Netherlands Central Bank, Directorate Supervision in its series Research Series Supervision (discontinued) with number 43.
Date of creation: Mar 2002
Date of revision:
foreign banks; cross-border credit; transition economies; financial stability;
Find related papers by JEL classification:
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-CFN-2003-07-13 (Corporate Finance)
- NEP-EEC-2003-07-13 (European Economics)
- NEP-MFD-2003-07-13 (Microfinance)
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