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Credit to Private Sector, Interest Spread and Volatility in Credit-Flows: Do Bank Ownership and Deposits Matter?

  • Hamid Rashid
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    With bank-level data from 81 developing countries, the paper shows that increased foreign bank presence is associated with increased reliance on non-deposit based funding, which leads to higher interest rate spreads, less credit to the private sector, and higher volatility in bank loans. Foreign bank entry significantly reduces domestic banks’ share of deposits while foreign banks typically allocate less of their assets and deposits to lending. As domestic banks lose their deposit base, they rely on non-deposit based funding, but its higher costs and uncertainty force domestic banks to reduce their lending activities.

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    Paper provided by United Nations, Department of Economics and Social Affairs in its series Working Papers with number 105.

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    Length: 42 pages
    Date of creation: May 2011
    Date of revision:
    Handle: RePEc:une:wpaper:105
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