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Multinational Banks

Author

Listed:
  • Stefania Garetto

    (Boston University)

  • Martin Goetz

    (Federal Reserve Bank of Boston)

  • Jose Fillat

    (Federal Reserve Bank of Boston)

Abstract

15% of the loans in the US are held by foreign banking institutions, headquartered in more than 50 countries. While earlier research documented the entry mode of foreign institutions in the United States, very little is known about foreign banks' motive to enter the U.S. We address this gap by asking: why do foreign banks enter in the US market? And what drives the institutional form they adopt upon entry? Using bank-level data, we present novel stylized facts describing characteristics of foreign institutions and compare then to the incumbent set of banks. Our findings suggest that several factors affect the form of entry: demand, business type, differences between countries' regulatory requirements, and access to funding. We incorporate these facts into a structural model of entry in the banking sector where profit maximizing foreign banks decide whether and how to enter the US market. The model sheds light on the relationship between market access, capital flows, regulation, and entry, and has implications for the risk exposure that different organizational forms entail.

Suggested Citation

  • Stefania Garetto & Martin Goetz & Jose Fillat, 2012. "Multinational Banks," 2012 Meeting Papers 898, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:898
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    Cited by:

    1. Sebastian Doerr & Philipp Schaz, 2018. "Bank loan supply during crises: the importance of geographic diversification," ECON - Working Papers 288, Department of Economics - University of Zurich, revised Mar 2019.
    2. Temesvary, Judit, 2018. "The transmission of foreign monetary policy shocks into the United States through foreign banks," Journal of Financial Stability, Elsevier, vol. 39(C), pages 104-124.

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