How should we bank with foreigners? An empirical assessment of lending behavior of international banks to six East Asian economies

We construct macro-and micro-panel data on international bank lending to six Asian economies—Indonesia, Korea, Malaysia, Philippines, Singapore, and Thailand—over the period 2000 to 2010 to analyze a number of objectives. The paper first examines the critical determinants not only to overall international bank lending but also to cross-border bank lending, and find that cross-border lending by international banks tend to pull out from host economies during difficult times in source economies, whereas such retrenchments are not evident on the basis of overall lending. The paper next examines the differences between subsidiaries and branches of international banks in their ability to shield themselves from the financial difficulties of their global parent banks and thus their ability to continue lending in destination markets. The results show that foreign bank subsidiaries are more capable in this regard.