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Foreign Banks and Credit Stability in Central and Eastern Europe: A Panel Data Analysis

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  • Ralph de Haas
  • Iman van Lelyveld

Abstract

We study whether foreign and domestic banks in Central and Eastern Europe react differently to business cycle conditions and host country banking crises. Our unique panel dataset comprises data of more than 250 banks for the period 1993-2000, with detailed information on bank ownership and mode of entry. We show that during crisis periods (former) domestic banks contracted their credit base, whereas greenfield foreign banks did not. Also, home country conditions matter for foreign bank growth, as there is a significant negative relationship between home country economic growth and host country credit by greenfields. Finally, foreign bank subsidiary’s credit growth is influenced by the health of the parent bank.

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File URL: http://www.dnb.nl/binaries/staff109_tcm46-146886.pdf
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Bibliographic Info

Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 109.

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Length: 23 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:dnb:staffs:109

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Keywords: foreign banks; transition economies; credit growth; financial stability;

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