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Foreign Banks: Trends, Impact and Financial Stability

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  • Mr. Stijn Claessens
  • Neeltje van Horen

Abstract

This paper introduces a comprehensive database on bank ownership for 137 countries over 1995-2009, and reviews foreign bank behavior and impact. It documents substantial increases in foreign bank presence, with many more home and host countries. Current market shares of foreign banks average 20 percent in OECD countries and 50 percent elsewhere. Foreign banks have higher capital and more liquidity, but lower profitability than domestic banks do. Only in developing countries is foreign bank presence negatively related with domestic credit creation. During the global crisis foreign banks reduced credit more compared to domestic banks, except when they dominated the host banking systems.

Suggested Citation

  • Mr. Stijn Claessens & Neeltje van Horen, 2012. "Foreign Banks: Trends, Impact and Financial Stability," IMF Working Papers 2012/010, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2012/010
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    More about this item

    Keywords

    WP; bank; lending; bank characteristic; parent bank; emerging market banks; Foreign banks; foreign direct investment; cross-border banking; bilateral investment; financial globalization; financial sector development; financial stability; spillovers; financial crisis; foreign bank; providing emerging market banks incentive; investment activity; domestic bank; Emerging and frontier financial markets; Credit; Commercial banks; Global; Asia and Pacific; Middle East; Central and Eastern Europe; South Asia;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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