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Financial Crises and the Presence of Foreign Banks

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  • Adrian E. Tschoegl

Abstract

The paper distinguishes between the classic or traditional foreign banks with their emphasis on corporate and wholesale banking, and the innovators responding to transition, deregulation or crisis in emerging markets. The innovators come in three varieties—bettors, prospectors and restructurers—with their role depending on their type. The paper argues, on the basis of 12 short national or regional case studies, that foreign banks have had little effect in evitting crisis, in great part because generally they were not present in any scale before the crisis. In the recovery phase foreign banks can act as rehabilitators of weak or failed banks, and can help ward off future crises by taking banks out of government or family ownership. The paper’s most controversial argument is that to the degree that reform succeeds, the conditions that attracted the foreign banks may disappear and the domestic banks are able to grow more rapidly. In subsequent decades many of the foreigner owners are likely to sell their subsidiaries to local banks and investors. Thus in succeeding decades, the ratio of assets in foreign- owned banks to total banking system assets should decline, even in the absence of government policies that aim for that result.

Suggested Citation

  • Adrian E. Tschoegl, 2004. "Financial Crises and the Presence of Foreign Banks," International Finance 0405016, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpif:0405016
    Note: Type of Document - pdf; pages: 73
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    References listed on IDEAS

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    Cited by:

    1. Aneta Hryckiewicz & Oskar Kowalewski, 2010. "Why do Foreign Banks Withdraw from other Countries? A Panel Data Analysis," CESifo Working Paper Series 3006, CESifo Group Munich.
    2. Parinduri, Rasyad A. & Riyanto, Yohanes E., 2012. "The Impact of the Strategic Sale of Restructured Banks: Evidence from Indonesia," World Development, Elsevier, vol. 40(3), pages 446-457.
    3. Aysan, Ahmet Faruk & Ceyhan, Sanli Pinar, 2006. "Globalization of Turkey’s Banking Sector: the Determinants of Foreign Bank Penetration in Turkey," MPRA Paper 5489, University Library of Munich, Germany.
    4. Cull, Robert & Martinez Peria, Maria Soledad, 2007. "Foreign bank participation and crises in developing countries," Policy Research Working Paper Series 4128, The World Bank.
    5. Ricardo Correa, 2009. "Cross-Border Bank Acquisitions: Is there a Performance Effect?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(2), pages 169-197, December.
    6. Ngoc-Anh Vo Thi & Dev Vencappa, 2008. "Does the Entry Mode of Foreign Banks Matter for Bank Efficiency? Evidence from the Czech Republic,Hungary, and Poland," William Davidson Institute Working Papers Series wp925, William Davidson Institute at the University of Michigan.
    7. Aysan, Ahmet Faruk & Ceyhan, Sanli Pinar, 2008. "Structural Change and the Efficiency of Banking In Turkey: Does Ownership Matter?," MPRA Paper 17849, University Library of Munich, Germany.
    8. Tschoegl, Adrian, 2006. "Foreign ownership in Mexican Banking: A Self- Correcting Phenomenon," MPRA Paper 586, University Library of Munich, Germany.
    9. Ahmet Faruk Aysan & S. P. Ceyhan, 2006. "Globalization of Turkey's Banking Sector: The Determinants of Foreign Banking Penetration in Turkey," Working Papers 2006/20, Bogazici University, Department of Economics.
    10. Farouk Soussa & Tracy Wheeler, 2006. "Do announcements of bank acquisitions in emerging markets create value?," Bank of England working papers 315, Bank of England.

    More about this item

    Keywords

    Argentina; Bulgaria; Czech Republic; Hungary; Indonesia; Jamaica; Malaysia; Mexico; Norway; Pacific Islands; Tanzania; Thailand; emerging markets;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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