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Foreign Banks

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  • Neeltje van Horen
  • Stijn Claessens

Abstract

This paper introduces a comprehensive database on bank ownership for 137 countries over 1995-2009, and reviews foreign bank behavior and impact. It documents substantial increases in foreign bank presence, with many more home and host countries. Current market shares of foreign banks average 20 percent in OECD countries and 50 percent elsewhere. Foreign banks have higher capital and more liquidity, but lower profitability than domestic banks do. Only in developing countries is foreign bank presence negatively related with domestic credit creation. During the global crisis foreign banks reduced credit more compared to domestic banks, except when they dominated the host banking systems.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/10.

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Length: 40
Date of creation: 01 Jan 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/10

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Keywords: Foreign direct investment; Financial stability; Spillovers; Financial crisis; Banking systems; Foreign investment; International banking; foreign banks; foreign bank; domestic banks; foreign ownership; host countries; host country; financial sector; financial services; direct investment; foreign affiliates; foreign entry; foreign investors; foreign investments; foreign participation; bilateral investment; market structure; international investor; international investment; domestic reform; negative relationship; medium-sized enterprises; free trade agreements; foreign affiliate; entry barriers; host-country; foreign exchange; limited entry;

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References

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  1. 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) 109, Netherlands Central Bank.
  2. Ralph de Haas & Neeltje van Horen, 2011. "Running for the Exit: International Banks and Crisis Transmission," DNB Working Papers 279, Netherlands Central Bank, Research Department.
  3. Ralph Haas & Iman Lelyveld, 2014. "Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 333-364, 02.
  4. Luc Laeven & Fabian Valencia, 2010. "Resolution of Banking Crises," IMF Working Papers 10/146, International Monetary Fund.
  5. Peek, Joe & Rosengren, Eric S. & Kasirye, Faith, 1999. "The poor performance of foreign bank subsidiaries: Were the problems acquired or created?," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 579-604, February.
  6. Alejandro Micco & Ugo Panizza & Monica Yañez, 2005. "Bank Ownership and Performance Does Politics Matter?," Working Papers Central Bank of Chile 356, Central Bank of Chile.
  7. Martinez Peria, Maria Soledad & Mody, Ashoka, 2004. "How foreign participation and market concentration impact bank spreads : evidence from Latin America," Policy Research Working Paper Series 3210, The World Bank.
  8. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
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  10. Nicola Cetorelli & Linda S Goldberg, 2011. "Global Banks and International Shock Transmission: Evidence from the Crisis," IMF Economic Review, Palgrave Macmillan, vol. 59(1), pages 41-76, April.
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  12. Van Horen, Neeltje, 2007. "Foreign banking in developing countries; origin matters," Emerging Markets Review, Elsevier, vol. 8(2), pages 81-105, May.
  13. Claessens, Stijn & Van Horen, Neeltje, 2007. "Location decisions of foreign banks and competitive advantage," Policy Research Working Paper Series 4113, The World Bank.
  14. Claessens, Stijn, 2006. "Competitive implications of cross-border banking," Policy Research Working Paper Series 3854, The World Bank.
  15. 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.
  16. Giorgio Barba Navaretti & Giacomo Calzolari & Alberto Franco Pozzolo & Micol Levi, 2010. "Multinational Banking in Europe: Financial Stability and Regulatory Implications;Lessons from the Financial Crisis," Mo.Fi.R. Working Papers 40, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  17. Grosse, Robert & Goldberg, Lawrence G., 1991. "Foreign bank activity in the United States: An analysis by country of origin," Journal of Banking & Finance, Elsevier, vol. 15(6), pages 1093-1112, December.
  18. Chava, Sudheer & Purnanandam, Amiyatosh, 2011. "The effect of banking crisis on bank-dependent borrowers," Journal of Financial Economics, Elsevier, vol. 99(1), pages 116-135, January.
  19. Arturo Galindo & Alejandro Micco & César Manuel Serra, 2003. "Better the Devil that You Know: Evidence on Entry Costs Faced by Foreign Banks," IDB Publications 6500, Inter-American Development Bank.
  20. Enrica Detragiache & Thierry Tressel & Poonam Gupta, 2008. "Foreign Banks in Poor Countries: Theory and Evidence," Journal of Finance, American Finance Association, vol. 63(5), pages 2123-2160, October.
  21. Brealey, R. A. & Kaplanis, E. C., 1996. "The determination of foreign banking location," Journal of International Money and Finance, Elsevier, vol. 15(4), pages 577-597, August.
  22. Haber, Stephen, 2004. "Comment on "How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America" by Maria Soledad Martinez Peria and Ashoka Mody," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 539-42, June.
  23. 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.
  24. Arturo Galindo & Alejandro Micco & César Manuel Serra, 2003. "Better the Devil that You Know: Evidence on Entry Costs Faced by Foreign Banks," Research Department Publications 4313, Inter-American Development Bank, Research Department.
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