The impact of funding models and foreign bank ownership on bank credit growth : is Central and Eastern Europe different ?
This paper provides new evidence on the factors affecting protracted credit contraction in the wake of the global financial crisis. The paper applies panel vector autoregressions to a global panel that consists of quarterly data for 41 countries for the period 2000-2011 and documents that domestic private credit growth is highly sensitive to cross-border funding shocks around the world. This relationship is significantly stronger in Central and Eastern Europe, a region with considerably stronger foreign presence, higher cross-border funding, and elevated loan-to-deposit ratios compared with the rest of the world. The paper shows that high foreign ownership per se does not appear to explain credit response differences to foreign funding shocks. Rather, there is a stronger response in countries that exhibit high loan-to-deposit ratios and a high reliance on foreign funding relative to local deposits. The results suggest that funding model differences were at the heart of the post-crisis credit contraction in several Central and Eastern European countries. These findings have important regulatory and supervisory implications for emerging countries in Central and Eastern Europe as well as for other countries.
|Date of creation:||01 Feb 2014|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gregorio Impavido & Heinz Rudolph & Luigi Ruggerone, 2013. "Bank Funding in Central, Eastern and South Eastern Europe Post Lehman; A “New Normal”?," IMF Working Papers 13/148, International Monetary Fund.
- Stijn Claessens & Neeltje van Horen, 2011.
"Foreign Banks: Trends, Impact and Financial Stability,"
DNB Working Papers
330, Netherlands Central Bank, Research Department.
- Neeltje van Horen & Stijn Claessens, 2012. "Foreign Banks; Trends, Impact and Financial Stability," IMF Working Papers 12/10, International Monetary Fund.
- Claessens, Stijn & Van Horen, Neeltje, 2013. "Impact of Foreign Banks," Journal of Financial Perspectives, EY Global FS Institute, vol. 1(1), pages 29-42.
- Stijn Claessens & Neeltje van Horen, 2013. "Impact of Foreign Banks," DNB Working Papers 370, Netherlands Central Bank, Research Department.
- Schoenmaker, Dirk, 2013. "Governance of International Banking: The Financial Trilemma," OUP Catalogue, Oxford University Press, number 9780199971596.
- Ralph De Haas & Neeltje Van Horen, 2013. "Running for the Exit? International Bank Lending During a Financial Crisis," Review of Financial Studies, Society for Financial Studies, vol. 26(1), pages 244-285.
- Ralph de Haas & Neeltje van Horen, 2011. "Running for the Exit: International Banks and Crisis Transmission," DNB Working Papers 279, Netherlands Central Bank, Research Department.
- Jonathan Fiechter & Inci Ötker & Anna Ilyina & Michael Hsu & Andre O Santos & Jay Surti, 2011. "Subsidiaries or Branches; Does One Size Fit All?," IMF Staff Discussion Notes 11/04, International Monetary Fund.
- Frederic S. Mishkin, 2007. "Is Financial Globalization Beneficial?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 259-294, 03.
- Frederic Mishkin, 2005. "Is Financial Globalization Beneficial?," NBER Working Papers 11891, National Bureau of Economic Research, Inc.
- Stijn Claessens & Neeltje Horen, 2014. "Foreign Banks: Trends and Impact," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 295-326, 02.
- Stijn Claessens & Neeltje van Horen, 2011. "Foreign Banks: Trends, Impact and Financial Stability," DNB Working Papers 330, Netherlands Central Bank, Research Department.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6783. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.