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Foreign Banks and Credit Stability in Central and Eastern Europe: Friends or Foes? A Panel Data Analysis

  • Ralph de Haas
  • Iman van Lelyveld

We study whether foreign and domestic banks in Central and Eastern Europe have reacted differently to business cycle conditions and host country banking crises. Our unique panel dataset comprises data of more than 300 banks for the period 1993-2000, with detailed information on bank ownership and mode of entry. Our analysis shows that during crisis periods domestic banks contracted their credit and deposit bases, whereas foreign banks - especially greenfields - did not. Also, home country conditions matter for foreign bank growth, as there is a significant and negative relationship between home country economic growth and host country credit by foreign banks.

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File URL: http://www.dnb.nl/en/binaries/ot058_tcm47-146067.pdf
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Paper provided by Netherlands Central Bank, Directorate Supervision in its series Research Series Supervision (discontinued) with number 58.

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Date of creation: May 2003
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Handle: RePEc:dnb:ressup:58
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Web page: http://www.dnb.nl/en/

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  1. Steven Fries & Damien Neven & Paul Seabright, 2002. "Bank performance in transition economies," Working Papers 76, European Bank for Reconstruction and Development, Office of the Chief Economist.
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  3. Gerard Caprio & Patrick Honohan, 2008. "Banking Crises," Department of Economics Working Papers 2008-07, Department of Economics, Williams College.
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  8. Bank for International Settlements, 2003. "Guide to the international banking statistics," BIS Papers, Bank for International Settlements, number 16, April.
  9. R. T.A. de Haas & I. P.P van Lelyveld, 2004. "Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 3(2), pages 125-151, August.
  10. Williams, Barry, 1997. " Positive Theories of Multinational Banking: Eclectic Theory versus Internalisation Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 11(1), pages 71-100, March.
  11. Serge Jeanneau & Marian Micu, 2002. "Determinants of international bank lending to emerging market countries," BIS Working Papers 112, Bank for International Settlements.
  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).
  13. Jeremy C. Stein, 1995. "Internal Capital Markets and the Competition for Corporate Resources," NBER Working Papers 5101, National Bureau of Economic Research, Inc.
  14. Joe Peek & Eric S. Rosengren, 2000. "Implications of the globalization of the banking sector: the Latin American experience," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 44(Jun), pages 145-185.
  15. Jennifer S. Crystal & B. Gerard Dages & Linda S. Goldberg, 2002. "Has foreign bank entry led to sounder banks in Latin America?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 8(Jan).
  16. Yongil Jeon & Stephen Miller, 2005. "Performance of Domestic and Foreign Banks: The Case of Korea and the Asian Financial Crisis," Global Economic Review, Taylor & Francis Journals, vol. 34(2), pages 145-165.
  17. B. Gerard Dages & Linda Goldberg & Daniel Kinney, 2000. "Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 17-36.
  18. Houston, Joel & James, Christopher & Marcus, David, 1997. "Capital market frictions and the role of internal capital markets in banking," Journal of Financial Economics, Elsevier, vol. 46(2), pages 135-164, November.
  19. Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, vol. 10(3), pages 355-358, July.
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