The impact of funding models and foreign bank ownership on bank credit growth : is Central and Eastern Europe different ?
AbstractThis paper provides new evidence on the factors affecting protracted credit contraction in the wake of the global financial crisis. The paper applies panel vector autoregressions to a global panel that consists of quarterly data for 41 countries for the period 2000-2011 and documents that domestic private credit growth is highly sensitive to cross-border funding shocks around the world. This relationship is significantly stronger in Central and Eastern Europe, a region with considerably stronger foreign presence, higher cross-border funding, and elevated loan-to-deposit ratios compared with the rest of the world. The paper shows that high foreign ownership per se does not appear to explain credit response differences to foreign funding shocks. Rather, there is a stronger response in countries that exhibit high loan-to-deposit ratios and a high reliance on foreign funding relative to local deposits. The results suggest that funding model differences were at the heart of the post-crisis credit contraction in several Central and Eastern European countries. These findings have important regulatory and supervisory implications for emerging countries in Central and Eastern Europe as well as for other countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6783.
Date of creation: 01 Feb 2014
Date of revision:
Bankruptcy and Resolution of Financial Distress; Access to Finance; Banks&Banking Reform; Economic Theory&Research; Deposit Insurance;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-01 (All new papers)
- NEP-BAN-2014-03-01 (Banking)
- NEP-EEC-2014-03-01 (European Economics)
- NEP-TRA-2014-03-01 (Transition Economics)
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.:
- Frederic Mishkin, 2005.
"Is Financial Globalization Beneficial?,"
NBER Working Papers
11891, National Bureau of Economic Research, Inc.
- Frederic S. Mishkin, 2007. "Is Financial Globalization Beneficial?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 39(2-3), pages 259-294, 03.
- Stijn Claessens & Neeltje van Horen, 2013.
"Impact of Foreign Banks,"
DNB Working Papers, Netherlands Central Bank, Research Department
370, Netherlands Central Bank, Research Department.
- Claessens, Stijn & Van Horen, Neeltje, 2013. "Impact of Foreign Banks," Journal of Financial Perspectives, EY Global FS Institute, EY Global FS Institute, vol. 1(1), pages 29-42.
- Brown, Martin & Ongena, Steven & Popov, Alexander & Yesin, Pinar, 2012.
"Who needs credit and who gets credit in Eastern Europe?,"
Working Paper Series, European Central Bank
1421, European Central Bank.
- Martin Brown & Steven Ongena & Alexander Popov & Pinar Yeşin, 2011. "Who needs credit and who gets credit in Eastern Europe?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 26(65), pages 93-130, January.
- Brown, M. & Ongena, S. & Popov, A. & Yesin, P., 2010. "Who Needs Credit and Who Gets Credit in Eastern Europe?," Discussion Paper, Tilburg University, Center for Economic Research 2010-50, Tilburg University, Center for Economic Research.
- Martin Brown & Steven Ongena & Alexander Popov & Pinar Yesin, 2010. "Who Needs Credit and Who Gets Credit in Eastern Europe?," Working Papers 2010-09, Swiss National Bank.
- Gregorio Impavido & Heinz Rudolph & Luigi Ruggerone, 2013. "Bank Funding in Central, Eastern and South Eastern Europe Post Lehman," IMF Working Papers, International Monetary Fund 13/148, International Monetary Fund.
- Ralph De Haas & Neeltje Van Horen, 2011.
"Running for the exit: international banks and crisis transmission,"
Working Papers, European Bank for Reconstruction and Development, Office of the Chief Economist
124, European Bank for Reconstruction and Development, Office of the Chief Economist.
- Ralph De Haas & Neeltje Van Horen, 2013. "Running for the Exit? International Bank Lending During a Financial Crisis," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 26(1), pages 244-285.
- Ralph de Haas & Neeltje van Horen, 2011. "Running for the Exit: International Banks and Crisis Transmission," DNB Working Papers, Netherlands Central Bank, Research Department 279, Netherlands Central Bank, Research Department.
- Schoenmaker, Dirk, 2013. "Governance of International Banking: The Financial Trilemma," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199971596, October.
- Jonathan Fiechter & Inci Ã–tker & Anna Ilyina & Michael Hsu & Andre Santos & Jay Surti, 2011. "Subsidiaries or Branches," IMF Staff Discussion Notes, International Monetary Fund 11/04, International Monetary Fund.
- Stijn Claessens & Neeltje Horen, 2014.
"Foreign Banks: Trends and Impact,"
Journal of Money, Credit and Banking, Blackwell Publishing,
Blackwell Publishing, vol. 46(s1), pages 295-326, 02.
- Neeltje van Horen & Stijn Claessens, 2012. "Foreign Banks," IMF Working Papers, International Monetary Fund 12/10, International Monetary Fund.
- Stijn Claessens & Neeltje van Horen, 2011. "Foreign Banks: Trends, Impact and Financial Stability," DNB Working Papers, Netherlands Central Bank, Research Department 330, Netherlands Central Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.