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Foreign Banks in Emerging Market Crises: Evidence from Malaysia

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Author Info
Enrica Detragiache
Poonam Gupta

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Abstract

Foreign banks have greatly increased their presence in emerging market countries in recent years. This paper compares the performance of domestic banks and a long-established group of foreign banks during the recent crisis in Malaysia. We find that the sharpest differences are between banks mainly active in Asia (including all domestic and some foreign banks) and foreign banks not specialized in Asia. The latter group performed better than the rest during the crisis, maintaining higher profitability thanks to higher interest margins and lower nonperforming loans. Foreign banks did not abandon the local market during the crisis and received less government support than domestic institutions.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/129.

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Length: 24 pages
Date of creation: 03 Aug 2004
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Handle: RePEc:imf:imfwpa:04/129

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Related research
Keywords: Banks ; Malaysia ; Emerging markets ; Banking systems ; Financial crisis ; Economic models ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Laeven, Luc, 1999. "Risk and efficiency in East Asian banks," Policy Research Working Paper Series 2255, The World Bank. [Downloadable!]
  2. Charles Enoch & Anne Marie Gulde & Carl-Johan Lindgren & Marc Quintyn & Leslie Teo & Tomás J. T. Baliño, 2000. "Financial Sector Crisis and Restructuring:Lessons from Asia," IMF Occasional Papers 188, International Monetary Fund. [Downloadable!]
  3. B. Gerard Dages & Linda Goldberg & Daniel Kinney, 2000. "Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 17-36. [Downloadable!]
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  4. Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad, 2001. "Does foreign bank penetration reduce access to credit in developing countries"evidence from asking borrowers," Policy Research Working Paper Series 2716, The World Bank. [Downloadable!]
  5. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank. [Downloadable!]
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  6. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May. [Downloadable!] (restricted)
  7. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 2000. "Globalization of financial institutions: evidence from cross-border banking performance," Finance and Economics Discussion Series 2000-04, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  8. Yougesh Khatri & Il Houng Lee & O. Liu & Kanitta Meesook & Natalia T. Tamirisa, 2001. "Malaysia: From Crisis to Recovery," IMF Occasional Papers 207, International Monetary Fund.
  9. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Herrero, Alicia Garcia & Martinez Peria, Maria Soledad, 2005. "The mix of international banks'foreign claims : determinants and implications," Policy Research Working Paper Series 3755, The World Bank. [Downloadable!]
    Other versions:
  2. Francisco F. Vázquez & Marco Arena & Carmen Reinhart, 2007. "The Lending Channel in Emerging Economies: Are Foreign Banks Different?," IMF Working Papers 07/48, International Monetary Fund. [Downloadable!]
    Other versions:
  3. Chantapong, Saovanee & Menkhoff, Lukas, 2005. "Cost Efficiency of Domestic and Foreign Banks in Thailand: Evidence from Panel Data," Proceedings of the German Development Economics Conference, Kiel 2005 9, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  4. Demirguc-Kunt, Asli & Detragiache, Enrica, 2005. "Cross-country empirical studies of systemic bank distress : a survey," Policy Research Working Paper Series 3719, The World Bank. [Downloadable!]
    Other versions:
  5. Richard Podpiera & Lamin Leigh, 2007. "The Rise of Foreign Investment in China's Banks: Taking Stock," IMF Working Papers 06/292, International Monetary Fund. [Downloadable!]
  6. Beck, Thorsten & Soledad Martinez Peria, Maria, 2008. "Foreign bank acquisitions and outreach : evidence from Mexico," Policy Research Working Paper Series 4467, The World Bank. [Downloadable!]
  7. Cull, Robert & Martinez Peria, Maria Soledad, 2007. "Foreign bank participation and crises in developing countries," Policy Research Working Paper Series 4128, The World Bank. [Downloadable!]
  8. Thierry Tressel & Enrica Detragiache & Poonam Gupta, 2005. "Finance in Lower Income Countries: An Empirical Exploration," IMF Working Papers 05/167, International Monetary Fund. [Downloadable!]
  9. Burcu Aydin, 2008. "Banking Structure and Credit Growth in Central and Eastern European Countries," IMF Working Papers 08/215, International Monetary Fund. [Downloadable!]
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