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Foreign banks and credit stability in Central and Eastern Europe. A panel data analysis

  • de Haas, Ralph
  • van Lelyveld, Iman

We study whether foreign and domestic banks in Central and Eastern Europe react differently to business cycle conditions and host country banking crises. Our unique panel dataset comprises data of more than 250 banks for the period 1993-2000, with detailed information on bank ownership and mode of entry. We show that during crisis periods (former) domestic banks contracted their credit base, whereas greenfield foreign banks did not. Also, home country conditions matter for foreign bank growth, as there is a significant negative relationship between home country economic growth and host country credit by greenfields. Finally, foreign bank subsidiary's credit growth is influenced by the health of the parent bank.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 30 (2006)
Issue (Month): 7 (July)
Pages: 1927-1952

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Handle: RePEc:eee:jbfina:v:30:y:2006:i:7:p:1927-1952
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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  12. Hermes, Niels & Lensink, Robert, 2001. "The impact of foreign bank entry on domestic banking markets: a note," Research Report 01E62, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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  18. Fries, Steven & Taci, Anita, 2005. "Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 55-81, January.
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  23. Ralph de Haas & Ilko Naaborg, 2005. "Internal Capital Markets in Multinational Banks: Implications for European Transition Countries," DNB Working Papers 051, Netherlands Central Bank, Research Department.
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