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Foreign bank participation and crises in developing countries

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Author Info

  • Cull, Robert
  • Martinez Peria, Maria Soledad

Abstract

This paper describes the recent trends in foreign bank ownership in developing countries, summarizes the existing evidence on the causes and implications of foreign bank presence, and reexamines the link between banking crises and foreign bank participation. Using data on the share of banking sector assets held by foreign banks in over 100 developing countries during 1995-2002, the results show that countries that experienced a banking crisis tended to have higher levels of foreign bank participation than those that did not. Furthermore, panel regressions indicate that foreign participation increased as a result of crises rather than prior to them. However, post-crisis increases in foreign participation did not coincide with increased credit to the private sector, perhaps because in many cases foreign banks acquired distressed banks.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4128.

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Date of creation: 01 Feb 2007
Date of revision:
Handle: RePEc:wbk:wbrwps:4128

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Keywords: Banks&Banking Reform; Foreign Direct Investment; Corporate Law; Privatization; Financial Crisis Management&Restructuring;

This paper has been announced in the following NEP Reports:

References

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Citations

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Cited by:
  1. Alberto Franco Pozzolo, 2008. "Bank cross-border mergers and acquisitions (Causes, consequences and recent trends)," Mo.Fi.R. Working Papers 9, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Haouat, Meriem & Moccero, Diego Nicolas & Sosa Navarro, Ramiro, 2010. "Foreign Banks and Credit Volatility: The Case of Latin American Countries," MPRA Paper 22991, University Library of Munich, Germany.
  3. Ramkishen S. Rajan & Sasidaran Gopalan, 2009. "Sales to Foreign Banks in Emerging Asia," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 7(3), pages 29-33, October.
  4. Wu, Ji & Luca, Alina C. & Jeon, Bang Nam, 2011. "Foreign bank penetration and the lending channel in emerging economies: Evidence from bank-level panel data," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1128-1156, October.
  5. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
  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.
  7. Beck, Thorsten & Martinez Peria, Maria Soledad, 2010. "Foreign bank participation and outreach: Evidence from Mexico," Journal of Financial Intermediation, Elsevier, vol. 19(1), pages 52-73, January.

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