The recent crisis revealed that lending by foreign banks can be more cyclical than that by domestic banks. This column presents research showing that bank ownership structure mattered, at least in the case of the UK. Foreign bank branches cut their lending more sharply than did foreign subsidiaries, thus, amplifying the domestic credit cycle. This finding suggests policymakers should pay close attention to risks that stem from foreign bank branches when they are ‘alive’, not only when they are ‘dead’ and pose an even greater financial instability.
John Hooley, Glenn Hoggarth, Yevgeniya Korniyenko, 14 February 2014
Thorsten Beck, Vasso Ioannidou, Larissa Schäfer, 13 July 2012
Financial aspects of the global crisis and the rolling bank scandals have led many to think again about their reliance on foreign banks. This column presents evidence that foreign banks do act differently. Among other things, they charge lower interest rates, but provide loans for shorter maturities, and are more likely to demand collateral.
The aim of the 2nd MoFiR Workshop on Banking is to bring together scholars in banking and finance to discuss the causes, transmission mechanisms, and consequences of the crisis, focusing also on the policy implications for the current situation and the potential reforms.
The organizing committee invites the submission of full papers or extended abstracts on the following themes:
• Financial sector fragility, contagion, safety nets, and crises;
• The (dis-)advantages of cross-border banking;
• Liquidity management and provision by financial intermediaries;
• Banks’ organizational models, informational asymmetries and distance;
• Bank lending, entrepreneurial finance and firm growth;
• Experiments in banking.
Stijn Claessens, Neeltje van Horen, 31 January 2012
How did foreign banks adjust their investment and lending decisions during the global financial crisis? This column uses a new and comprehensive database to show that the crisis dramatically halted foreign direct investment in banking and that foreign banks often cut back on lending more than their domestic competitors. While exits have so far been limited, this is likely to change in the coming years.
Stijn Claessens, Neeltje van Horen, 28 January 2012
Foreign banks on domestic soil have always been controversial. This column presents a newly collected, comprehensive database on bank ownership for 137 countries over the period 1995–2009. It shows that current market shares of foreign banks average 20% in OECD countries and 50% elsewhere. In developing countries, however, foreign bank presence is correlated with less private credit.
Thorsten Beck, Asli Demirgüç-Kunt, Maria Soledad Martinez Peria, 01 April 2010
Small and medium enterprises are engines of economic growth. But what kind of market structure is more conducive to financing these enterprises? This column argues that different types of bank, applying different types of lending technology and organisational structures can all play a vital role in financing them.
Ralph De Haas, 28 May 2009
In recent months, foreign-owned banks have been accused of abandoning the emerging markets that have contributed so much to their profitability over the last decade. This column analyses a large bank-level dataset of foreign bank subsidiaries across the world, to compare lending by foreign bank subsidiaries with lending by domestic banks. Importantly, it finds that as a result of parental support, foreign bank subsidiaries do not typically rein in their lending during a financial crisis.