Financial protectionism: the first tests

Andrew Rose and Tomasz Wieladek

No 32, Discussion Papers from Monetary Policy Committee Unit, Bank of England

Abstract: We provide the first empirical tests for financial protectionism, defined as a nationalistic change in banks' lending behaviour, as the result of public intervention, which leads domestic banks either to lend less or at higher interest rates to foreigners. We use a bank-level panel data set spanning all British and foreign banks providing loans within the United Kingdom between 1997 Q3 and 2010 Q1. During this time, a number of banks were nationalised, privatised, given unusual access to loan or credit guarantees, or received capital injections. We use standard empirical panel-data techniques to study the 'loan mix', domestic (British) loans of a bank expressed as a fraction of its total loan activity. We also study effective short-term interset rates, though our data set here is much smaller. We examine the loan mix for both British and foreign banks, both before and after unusual public interventions such as nationalisations and public capital injections. We find strong evidence of financial protectionism. After nationalisations, foreign banks reduced the fraction of loans going to the United Kingdom by around 11 precentage points and increased their effective interest rates by about 70 basis points. By way of contrast, nationalised British banks did not significantly change either their loan mix or effect interest rates. Succinctly, foreign nationalised banks seem to have engaged in financial protectionism, while British nationalised banks have not.

Keywords: Bank; nationalisation; privatisation; crisis; loan; domestic; foreign; empirical; panel (search for similar items in EconPapers)
JEL-codes: F36 G21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-05-01
New Economics Papers: this item is included in nep-ban, nep-cba and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... nism-the-first-tests Full text (application/pdf)

Related works:
Working Paper: Financial Protectionism: the First Tests (2011)
Working Paper: Financial Protectionism: the First Tests (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mpc:wpaper:0032

Access Statistics for this paper

More papers in Discussion Papers from Monetary Policy Committee Unit, Bank of England Contact information at EDIRC.
Bibliographic data for series maintained by Bank of England Website ().