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The Influence of Bank Ownership on Credit Supply: Evidence from the Recent Financial Crisis

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  • Fungacova, Zuzana

    ()
    (BOFIT)

  • Herrala, Risto

    ()
    (BOFIT)

  • Weill, Laurent

    (BOFIT)

Abstract

This study examines how bank ownership influenced the credit supply during the recent financial crisis in Russia, where the banking sector consists of a mix of state-controlled banks, foreign-owned banks, and domestic private banks. To estimate credit supply changes, we employ an exhaustive dataset for Russian banks that covers the crisis period and apply an original approach based on stochastic frontier analysis. Our findings suggest bank ownership affected credit supply during the financial crisis and that the crisis led to an overall decrease in the credit supply. Relative to domestic private banks foreign-owned banks reduced their credit supply more and state-controlled banks less. This supports the hypothesis that foreign banks have a “lack of loyalty” to domestic actors during a crisis, as well as the view that an objective function of state-controlled banks leads them to support the economy during economic downturns.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 34/2011.

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Length: 28 pages
Date of creation: 16 Dec 2011
Date of revision:
Handle: RePEc:hhs:bofitp:2011_034

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: bank; credit policy; foreign ownership; state ownership; stochastic frontier analysis;

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References

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  1. de Haas, Ralph & van Lelyveld, Iman, 2006. "Foreign banks and credit stability in Central and Eastern Europe. A panel data analysis," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 1927-1952, July.
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Citations

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Cited by:
  1. Georgios Efthyvoulou & Canan Yildirim, 2013. "Market Power in CEE Banking Sectors and the Impact of the Global Financial Crisis," CASE Network Studies and Analyses 0452, CASE-Center for Social and Economic Research.
  2. Vernikov, Andrei, 2012. "«Национальные Чемпионы» В Структуре Российского Рынка Банковских Услуг
    [National champions and the competitive structure of the Russia
    ," MPRA Paper 40236, University Library of Munich, Germany.
  3. Gozgor, Giray, 2014. "Determinants of domestic credit levels in emerging markets: The role of external factors," Emerging Markets Review, Elsevier, vol. 18(C), pages 1-18.
  4. 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.
  5. Herrala, Risto, 2014. "Forward-looking reaction to bank regulation," Working Paper Series 1645, European Central Bank.
  6. Choi, Moon Jung & Gutierrez, Eva & Peria, Maria Soledad Martinez, 2013. "Dissecting foreign bank lending behavior during the 2008-2009 crisis," Policy Research Working Paper Series 6674, The World Bank.
  7. Herrala, Risto & Jia, Yandong, 2012. "Has the Chinese growth model changed? A view from the credit market," BOFIT Discussion Papers 5/2012, Bank of Finland, Institute for Economies in Transition.
  8. Fungacova, Zuzana & Herrala, Risto & Weill, Laurent, 2011. "The Influence of Bank Ownership on Credit Supply: Evidence from the Recent Financial Crisis," BOFIT Discussion Papers 34/2011, Bank of Finland, Institute for Economies in Transition.
  9. Risto Herrala & Rima Turk Ariss, 2013. "Credit Constraints, Political Instability, and Capital Accumulation," IMF Working Papers 13/246, International Monetary Fund.

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