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Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe

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  • Ralph de Haas

    (De Nederlandsche Bank)

  • Iman van Lelyveld

    (De Nederlandsche Bank)

Abstract

We analyse foreign bank penetration in Central and Eastern Europe (CEE)and its influence on private sector credit,taking into account both cross-border credit and credit by foreign bank subsidiaries. By combining BIS and BankScope data into a unique database we make a clear distinction between these credit categories.We show that the relative importance of foreign bank subsidiaries has increased considerably during recent years.However,in Hungary and Poland foreign banks were also important during the first transition years,as they provided substantial amounts of cross-border credit.We do not find evidence of foreign banks deserting CEE during financial crises or economic downturns.Although cross-border credit did decrease during some periods,foreign banks expanded the credit supply of their subsidiaries simultaneously.This may be an important consideration for (transition)countries that still have to decide whether to open up their markets to foreign bank subsidiaries.

Suggested Citation

  • Ralph de Haas & Iman van Lelyveld, 2002. "Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe," International Finance 0209002, EconWPA.
  • Handle: RePEc:wpa:wuwpif:0209002
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    References listed on IDEAS

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    1. Fernando J. Cardim de Carvalho, 2000. "New competitive strategies of foreign banks in large emerging economies: the case of Brazil," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 53(213), pages 135-169.
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    6. Claessens, Stijn & Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "How does foreign entry affect the domestic banking market?," Policy Research Working Paper Series 1918, The World Bank.
    7. Schardax, Franz & Reininger, Thomas & Summer, Martin, 2001. "The Financial System in the Czech Republic, Hungary and Poland after a Decade of Transition," Discussion Paper Series 1: Economic Studies 2001,16, Deutsche Bundesbank.
    8. McKinnon, Ronald I & Pill, Huw, 1997. "Credible Economic Liberalizations and Overborrowing," American Economic Review, American Economic Association, vol. 87(2), pages 189-193, May.
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    More about this item

    Keywords

    foreign banks; cross-border credit; transition economies;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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