Have Foreign Banks Contributed to the Spread of the Global Financial Crisis to Saudi Arabia?
AbstractWe analyze the role of domestic and foreign banks in Saudi Arabia during the latest financial crisis that has ravaged the world since 2007. The study is based on the growth rate in market share of the credit extended by each bank and investors’ perception about the risk exposure of this financial institution. We distinguish between purely domestic banks and institutions with joint ownership (local and foreign shareholders). While there is a suspicion that partly owned foreign banks are more risk exposed than their purely domestic counterparts, our findings suggest otherwise. Specifically we do not find evidence that foreign shareholders of Saudi banks, who suffered losses and liquidity problems in their home countries, cut credit in Saudi Arabia nor acted in a manner inconsistent with their domestic counterparts. As such, recommendations for a double standard in banking regulation are not supported by the evidence.
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Bibliographic InfoPaper provided by Economic Research Forum in its series Working Papers with number 537.
Length: 15 pages
Date of creation: Aug 2010
Date of revision: Aug 2010
Publication status: Published by The Economic Research Forum (ERF)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-11 (All new papers)
- NEP-ARA-2010-09-11 (MENA - Middle East & North Africa)
- NEP-IFN-2010-09-11 (International Finance)
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