How Should We Bank With Foreigners?â€”An Empirical Assessment of Lending Behavior of International Banks to Six East Asian Economies
Abstractï»¿ï»¿The possible crucial role of international bank lending in transmitting adverse economic disturbance from developed economies to emerging economies in the 2008â€“2009 global financial crisis has placed capital flows into sharper scrutiny in academic and policy discussions. The authors construct macro-and micro-panel data on international bank lending to six Asian economiesâ€”Indonesia, the Republic of Korea, Malaysia, Philippines, Singapore, and Thailandâ€”to analyze a number of objectives. The paper first examines the influence of critical determinants not only to overall international bank lending but also to cross-border bank lending, and obtained one finding that cross-border lending by international banks tend to pull out from host economies during difficult times in source economies, whereas such retrenchments are not evident on an aggregated basis. This suggests that encouraging brick-and-mortar affiliates of international banks to â€œset up shopâ€ in recipient economies may be the judicious choice for these economies. The paper next examines the differences between subsidiaries and branches of international banks in terms of their ability to shield themselves from the financial difficulties of their global parent banks and thus their ability to continue lending in destination markets. The results show that foreign bank subsidiaries are more capable in this regard. This finding carries with it the attraction of favoring an organizational banking structure that is biased toward subsidiaries. However, national banking regulators should remember that apart from encouraging a host of other domestic and cross-border initiatives, encouraging the entry of brick-and-mortar subsidiaries of international banks should not be viewed as a panacea to financial stability concerns of economies in Asia and in emerging markets in general.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 23347.
Date of creation: Oct 2012
Date of revision:
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international bank lending; Lending Behavior; East Asian Economies; emerging economies; international banks; Emerging Markets;
Other versions of this item:
- Victor Pontines & Reza Y. Siregar, 2012. "How Should We Bank With Foreigners?â€”An Empirical Assessment of Lending Behavior of International Banks to Six East Asian Economies," Macroeconomics Working Papers 23347, East Asian Bureau of Economic Research.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-06 (All new papers)
- NEP-IFN-2012-12-06 (International Finance)
- NEP-SEA-2012-12-06 (South East Asia)
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