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Foreign bank participation and crises in developing countries

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  • Cull, Robert
  • Martinez Peria, Maria Soledad

Abstract

This paper describes the recent trends in foreign bank ownership in developing countries, summarizes the existing evidence on the causes and implications of foreign bank presence, and reexamines the link between banking crises and foreign bank participation. Using data on the share of banking sector assets held by foreign banks in over 100 developing countries during 1995-2002, the results show that countries that experienced a banking crisis tended to have higher levels of foreign bank participation than those that did not. Furthermore, panel regressions indicate that foreign participation increased as a result of crises rather than prior to them. However, post-crisis increases in foreign participation did not coincide with increased credit to the private sector, perhaps because in many cases foreign banks acquired distressed banks.

Suggested Citation

  • Cull, Robert & Martinez Peria, Maria Soledad, 2007. "Foreign bank participation and crises in developing countries," Policy Research Working Paper Series 4128, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4128
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    2. Kshetri, Nir, 2016. "Big data’s role in expanding access to financial services in China," International Journal of Information Management, Elsevier, vol. 36(3), pages 297-308.
    3. Wu, Ji & Luca, Alina C. & Jeon, Bang Nam, 2011. "Foreign bank penetration and the lending channel in emerging economies: Evidence from bank-level panel data," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1128-1156, October.
    4. Bank for International Settlements, 2010. "Long-term issues in international banking," CGFS Papers, Bank for International Settlements, number 41.
    5. Meriem Haouat & Diego N. Moccero & Ramiro Sosa Navarro, 2012. "Foreign Banks and Credit Volatility: The Case of Latin American Countries," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 1017-1033, November.
    6. Liangliang Jiang & Yi Zhu, 2014. "Effects of Foreign Institutional Ownership on Foreign Bank Lending: Some Evidence for Emerging Markets," International Review of Finance, International Review of Finance Ltd., vol. 14(2), pages 263-293, June.
    7. Vogel, Ursula & Winkler, Adalbert, 2010. "Foreign banks and financial stability in emerging markets: Evidence from the global financial crisis," Frankfurt School - Working Paper Series 149, Frankfurt School of Finance and Management.
    8. Rodolphe Desbordes, 2022. "Financial foreign direct investment and the economic performance of developing countries," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 1229-1257, September.
    9. Niepmann, Friederike, 2015. "Banking across borders," Journal of International Economics, Elsevier, vol. 96(2), pages 244-265.
    10. Annick Pamen Nyola & Alain Sauviat & Amine Tarazi, 2022. "How does regulation affect the organizational form of foreign banks' presence in developing versus developed countries?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2367-2419, April.
    11. Beck, Thorsten & Martinez Peria, Maria Soledad, 2010. "Foreign bank participation and outreach: Evidence from Mexico," Journal of Financial Intermediation, Elsevier, vol. 19(1), pages 52-73, January.
    12. Meriem Haouat & Diego N. Moccero & Ramiro Sosa Navarro, 2012. "Foreign Banks and Credit Volatility: The Case of Latin American Countries," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 1017-1033, November.
    13. Beck, Thorsten & Soledad Martinez Peria, Maria, 2008. "Foreign bank acquisitions and outreach : evidence from Mexico," Policy Research Working Paper Series 4467, The World Bank.
    14. Beck, Thorsten & Hesse, Heiko, 2009. "Why are interest spreads so high in Uganda?," Journal of Development Economics, Elsevier, vol. 88(2), pages 192-204, March.
    15. Jeon, Bang Nam & Wu, Ji, 2014. "The role of foreign banks in monetary policy transmission: Evidence from Asia during the crisis of 2008–9," Pacific-Basin Finance Journal, Elsevier, vol. 29(C), pages 96-120.
    16. Ramkishen S. Rajan & Sasidaran Gopalan, 2009. "Sales to Foreign Banks in Emerging Asia," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(3), pages 29-33, October.
    17. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
    18. Hryckiewicz, Aneta & Kozlowski, Lukasz, 2018. "A horserace or boost in market power? Banking sector competition after foreign bank exits," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 371-389.

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    Banks&Banking Reform; Foreign Direct Investment; Corporate Law; Privatization; Financial Crisis Management&Restructuring;
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