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Financial Crises and the Presence of Foreign Banks

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Author Info
Adrian E. Tschoegl

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Abstract

The paper distinguishes between the classic or traditional foreign banks with their emphasis on corporate and wholesale banking, and the innovators responding to transition, deregulation or crisis in emerging markets. The innovators come in three varieties—bettors, prospectors and restructurers—with their role depending on their type. The paper argues, on the basis of 12 short national or regional case studies, that foreign banks have had little effect in evitting crisis, in great part because generally they were not present in any scale before the crisis. In the recovery phase foreign banks can act as rehabilitators of weak or failed banks, and can help ward off future crises by taking banks out of government or family ownership. The paper’s most controversial argument is that to the degree that reform succeeds, the conditions that attracted the foreign banks may disappear and the domestic banks are able to grow more rapidly. In subsequent decades many of the foreigner owners are likely to sell their subsidiaries to local banks and investors. Thus in succeeding decades, the ratio of assets in foreign- owned banks to total banking system assets should decline, even in the absence of government policies that aim for that result.

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Paper provided by EconWPA in its series International Finance with number 0405016.

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Length: 73 pages
Date of creation: 10 May 2004
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Handle: RePEc:wpa:wuwpif:0405016

Note: Type of Document - pdf; pages: 73
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Web page: http://129.3.20.41

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Related research
Keywords: Argentina; Bulgaria; Czech Republic; Hungary; Indonesia; Jamaica; Malaysia; Mexico; Norway; Pacific Islands; Tanzania; Thailand; emerging markets;

Find related papers by JEL classification:
F3 - International Economics - - International Finance
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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.:
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    Other versions:
  3. Laeven, Luc, 1999. "Risk and efficiency in East Asian banks," Policy Research Working Paper Series 2255, The World Bank. [Downloadable!]
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  7. Adrian E. Tschoegl, 2000. "Foreign Banks in the United States Since World War II: A Useful Fringe," Center for Financial Institutions Working Papers 00-42, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
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    Other versions:
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    Other versions:
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  22. Rafael La Porta & Florencio López-de-Silanes & Guillermo Zamarripa, 2003. "Related Lending," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 231-268, February. [Downloadable!] (restricted)
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  23. Daniel Gros, 2003. "Who Needs Foreign Banks?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  28. Adrian E. Tschoegl, 1997. "Entry and Survival: The Case of Foreign Banks in Norway," Center for Financial Institutions Working Papers 97-40, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
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  31. Engwall, Lars & Marquardt, Rolf & Pedersen, Torben & Tschoegl, Adrian E., 2001. "Foreign bank penetration of newly opened markets in the Nordic countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 11(1), pages 53-63, March. [Downloadable!] (restricted)
    Other versions:
  32. James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  33. Brickley, James A. & Linck, James S. & Smith, Clifford Jr., 2003. "Boundaries of the firm: evidence from the banking industry," Journal of Financial Economics, Elsevier, vol. 70(3), pages 351-383, December. [Downloadable!] (restricted)
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Full references

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. Tschoegl, Adrian, 2006. "Foreign ownership in Mexican Banking: A Self- Correcting Phenomenon," MPRA Paper 586, University Library of Munich, Germany. [Downloadable!]
  2. Rasyad A. Parinduri & Yohanes E. Riyanto, 2007. "The effect of Strategic Sale of Banks: Evidence from Indonesia," SCAPE Policy Research Working Paper Series 0709, National University of Singapore, Department of Economics, SCAPE. [Downloadable!]
  3. Aysan, Ahmet Faruk & Ceyhan, Şanlı Pınar, 2006. "Globalization of Turkey’s Banking Sector: the Determinants of Foreign Bank Penetration in Turkey," MPRA Paper 5489, University Library of Munich, Germany. [Downloadable!]
  4. 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!]
  5. Ahmet Faruk Aysan & S. P. Ceyhan, 2006. "Globalization of Turkey's Banking Sector: The Determinants of Foreign Banking Penetration in Turkey," Working Papers 2006/20, Bogazici University, Department of Economics. [Downloadable!]
  6. Aysan, Ahmet Faruk & Ceyhan, Sanli Pinar, 2008. "Structural Change and the Efficiency of Banking In Turkey: Does Ownership Matter?," MPRA Paper 17849, University Library of Munich, Germany. [Downloadable!]
  7. Farouk Soussa & Tracy Wheeler, . "Do announcements of bank acquisitions in emerging markets create value?," Bank of England working papers 315, Bank of England. [Downloadable!]
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