Direct Cross-Border Lending by Austrian Banks to Eastern Europe

Claus Puhr (), Markus Schwaiger () and Michael Sigmund
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Claus Puhr: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division
Markus Schwaiger: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division, http://www.oenb.at

Financial Stability Report, 2009, issue 17, 102-122

Abstract: Direct cross-border lending is an important component in the ongoing process of financial deepening in Central, Eastern and Southeastern Europe (CESEE) and the Commonwealth of Independent States (CIS). We use a loan-level dataset of Austrian banks to study the characteristics as well as the major driving forces of direct cross-border lending in CESEE and the CIS. Direct cross-border lending to nonbanks by Austrian banks expanded rapidly over the last few years; the bulk of loans is extended to corporate customers and is denominated in a foreign currency, with the euro taking a prominent position. By means of a series of univariate analyses, we provide support for the relevance of geographic proximity – small and medium-sized banks mainly lend to neighboring countries. Banks’ direct lending also seems to follow nonfinancial FDI by Austrian corporates to CESEE and the CIS. We furthermore analyze the interdependencies between direct (i.e. by Austrian headquarters) and indirect (i.e. by local subsidiaries) cross-border lending and find support for a complementary effect between the two. In addition, host country factors such as GDP growth, private sector credit growth, financial intermediation growth and wage growth are also associated with direct lending growth.

Keywords: direct lending; cross-border lending; credit growth; Central; Eastern and Southeastern Europe (search for similar items in EconPapers)
JEL-codes: F37 G21 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (5)

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