Dissecting foreign bank lending behavior during the 2008-2009 crisis

Moon Jung Choi, Eva Gutierrez and Maria Soledad Martinez Peria

No 6674, Policy Research Working Paper Series from The World Bank

Abstract: This paper analyzes the lending behavior of foreign-owned banks during the recent global crisis. Using bank-level panel data for countries in Central and Eastern Europe, East Asia, and Latin America, the paper explores the role of affiliate and parent financial characteristics, host location, as well as the impact of parent geographic origin and reach on foreign banks'credit growth. Overall, the analysis finds robust evidence that foreign banks curtailed the growth of credit relative to other banks, independent of the host region. Banks from the United States reduced loan growth less than other parent banks. Neither the global nor regional reach of parent banks influenced the lending growth of foreign affiliates. However, the funding structure of foreign bank affiliates and the capitalization of parent banks do help explain the lending behavior of foreign banks during the global crisis. Although not the focus of the paper, it also finds that government-owned banks played a countercyclical role in all regions.

Keywords: Banks&Banking Reform; Access to Finance; Debt Markets; Bankruptcy and Resolution of Financial Distress; Financial Intermediation (search for similar items in EconPapers)
Date: 2013-10-01
New Economics Papers: this item is included in nep-ban, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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