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Foreign banks and the Vienna Initiative: turning sinners into saints

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Author Info

  • Ralph De Haas

    ()
    (EBRD)

  • Yevgeniya Korniyenko

    (Bank of England)

  • Elena Loukoianova

    (IMF)

  • Alexander Pivovarsky

    (EBRD)

Abstract

We use data on 1,294 banks in emerging Europe to analyse how bank ownership and the Vienna Initiative affected credit growth during the 2008-09 crisis. As part of the Vienna Initiative western European banks signed country-specific commitment letters in which they pledged to maintain exposures and to support their subsidiaries in emerging Europe. We show that in general both domestic and foreign banks sharply curtailed credit during the crisis, but that foreign banks that participated in the Vienna Initiative were relatively stable lenders. We find no evidence of negative spillovers from countries where banks signed commitment letters to countries where they did not.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 143.

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Length: 42 pages
Date of creation: Mar 2012
Date of revision:
Publication status: Published in Working papers 143, European Bank for Reconstruction and Development
Handle: RePEc:ebd:wpaper:143

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Keywords: Foreign banks; Vienna Initiative; financial crisis; state support;

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References

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  1. Corsetti, Giancarlo & Guimaraes, Bernardo & Roubini, Nouriel, 2006. "International lending of last resort and moral hazard: A model of IMF's catalytic finance," Journal of Monetary Economics, Elsevier, Elsevier, vol. 53(3), pages 441-471, April.
  2. Dinger, Valeriya, 2009. "Do foreign-owned banks affect banking system liquidity risk?," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 647-657, December.
  3. Stephen Morris & Hyun Song Shin, 2004. "Catalytic Finance: When Does It Work?," Yale School of Management Working Papers, Yale School of Management ysm339, Yale School of Management.
  4. Andrew K. Rose & Tomasz Wieladek, 2011. "Financial Protectionism: the First Tests," NBER Working Papers 17073, National Bureau of Economic Research, Inc.
  5. Chava, Sudheer & Purnanandam, Amiyatosh, 2011. "The effect of banking crisis on bank-dependent borrowers," Journal of Financial Economics, Elsevier, Elsevier, vol. 99(1), pages 116-135, January.
  6. Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.
  7. Ralph de Haas & Iman van Lelyveld, 2011. "Multinational Banks and the Global Financial Crisis. Weathering the Perfect Storm?," DNB Working Papers, Netherlands Central Bank, Research Department 322, Netherlands Central Bank, Research Department.
  8. Olena Havrylchyk & Emilia Jurzyk, 2008. "Inherited or Earned? Performance of Foreign Banks in Central and Eastern Europe," Working Papers 2008-16, CEPII research center.
  9. Brei, Michael & Gambacorta, Leonardo & von Peter, Goetz, 2013. "Rescue packages and bank lending," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(2), pages 490-505.
  10. Barba Navaretti, Giorgio & Calzolari, Giacomo & Pozzolo, Alberto Franco, 2011. "Multinational Banking in Europe - Financial Stability and Regulatory Implications: Lessons from the financial crisis," Economics & Statistics Discussion Papers esdp11056, University of Molise, Dept. EGSeI.
  11. Yulia Makarova & Anna Ilyina & Christian Schmieder & Eugenio Cerutti, 2010. "Bankers without Borders? Implications of Ring-Fencing for European Cross-Border Banks," IMF Working Papers 10/247, International Monetary Fund.
  12. de Haas, Ralph & van Horen, Neeltje, 2012. "International Shock Transmission after the Lehman Brothers Collapse. Evidence from Syndicated Lending," MPRA Paper 36001, University Library of Munich, Germany.
  13. Ralph de Haas & Iman van Lelyveld, 2003. "Foreign Banks and Credit Stability in Central and Eastern Europe: A Panel Data Analysis," DNB Staff Reports (discontinued), Netherlands Central Bank 109, Netherlands Central Bank.
  14. Brown, Martin & de Haas, Ralph, 2012. "Foreign banks and foreign currency lending in emerging Europe," MPRA Paper 36323, University Library of Munich, Germany.
  15. Joe Peek & Eric S. Rosengren, 2000. "Implications of the globalization of the banking sector: the Latin American experience," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Sep, pages 45-62.
  16. Ralph De Haas & Iman Van Lelyveld, 2008. "Internal capital markets and lending by multinational bank subsidiaries," Working Papers, European Bank for Reconstruction and Development, Office of the Chief Economist 105, European Bank for Reconstruction and Development, Office of the Chief Economist.
  17. Fries, Steven & Taci, Anita, 2005. "Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries," Journal of Banking & Finance, Elsevier, Elsevier, vol. 29(1), pages 55-81, January.
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Citations

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Cited by:
  1. International Monetary Fund & World Bank, 2013. "Financial Sector Assessment Program : Nigeria - Banking Cross-Border Issues," World Bank Other Operational Studies 15966, The World Bank.
  2. Rudiger Ahrend & Antoine Goujard & Cyrille Schwellnus, 2012. "International Capital Mobility: Which Structural Policies Reduce Financial Fragility?," OECD Economic Policy Papers 2, OECD Publishing.
  3. Vivek Arora & Karl Habermeier & Jonathan D. Ostry & Rhoda Weeks-Brown, 2013. "La liberalización y el manejo de los flujos de capital: una visión institucional," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, Universidad Externado de Colombia - Facultad de Economía, vol. 15(28), pages 205-255, January-J.
  4. Cull, Robert & Peria, Maria Soledad Martinez, 2012. "Bank ownership and lending patterns during the 2008-2009 financial crisis : evidence from Latin America and Eastern Europe," Policy Research Working Paper Series 6195, The World Bank.
  5. Camlica, Ferhat & Orman, Cuneyt & Payzanoglu, Durukan & Yucel, Eray, 2012. "Southeastern Europe: post-crisis prospects and risks," MPRA Paper 45539, University Library of Munich, Germany.
  6. Brown, Martin, 2013. "The transmission of banking crises to households : lessons from the 2008-2011 crises in the ECA region," Policy Research Working Paper Series 6528, The World Bank.
  7. Allen, Franklin & Jackowicz, Krzysztof & Kowalewski, Oskar, 2013. "The effects of foreign and government ownership on bank lending behavior during a crisis in Central and Eastern Europe," MPRA Paper 48059, University Library of Munich, Germany.
  8. Berg, Gunhild & Kirschenmann, Karolin, 2012. "Funding vs. real economy shock : the impact of the 2007-2009 crisis on small firms'credit availability," Policy Research Working Paper Series 6030, The World Bank.
  9. Claessens, Stijn & Van Horen, Neeltje, 2013. "Impact of Foreign Banks," Journal of Financial Perspectives, EY Global FS Institute, EY Global FS Institute, vol. 1(1), pages 29-42.
  10. Philip Lane, 2013. "Financial Globalisation and the Crisis," Open Economies Review, Springer, Springer, vol. 24(3), pages 555-580, July.
  11. Brei, Michael & Schclarek, Alfredo, 2013. "Public bank lending in times of crisis," Journal of Financial Stability, Elsevier, Elsevier, vol. 9(4), pages 820-830.

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