What determines banks’ customer choice? Evidence from transition countries

Ralph De Haas, Daniel Ferreira and Anita Taci

MPRA Paper from University Library of Munich, Germany

Abstract: This paper explores how bank characteristics and the institutional environment influence the composition of banks’ loan portfolios. Using a new data set based on the recent EBRD Banking Environment and Performance Survey (BEPS), which was conducted in 2005 for 220 banks in 20 transition countries, we show that bank characteristics such as ownership and size are important determinants of bank customer focus. In particular, we find that foreign banks are relatively strongly involved in mortgage lending and lending to subsidiaries of foreign companies, while lending relatively less to large domestic firms. We also find that small banks lend relatively more to SMEs than large banks do, while large banks appear to have a comparative advantage in lending to large customers. We do not find much evidence for the hypothesis that better legal credit protection changes bank portfolio composition. An exception is that banks that perceive pledge and mortgage laws to be of high quality focus more on mortgage lending.

Keywords: banking; portfolio composition (search for similar items in EconPapers)
JEL-codes: F3 G21 K22 P27 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-ban, nep-law and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6319

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