Foreign Bank Behavior During Financial Crises

One of the persistent policy problems faced by governments contemplating financial liberalizations is the question of whether to allow foreign banks entry into the domestic economy. This question has become ever more urgent in recent times, due to rapid financial globalization, coupled with the credit contractions experienced as a result of the 2007/08 financial crisis. This paper examines the question of whether opening the financial sector to foreign participation is a good idea for developing countries, using a unique bank-level database of foreign ownership. In particular, the authors examine whether the credit supply of majority foreign-owned financial institutions differ systematically conditional on a crisis event in their home economies. They show that foreign banks that were exposed to crises in their home countries exhibit changes in lending patterns that are lower by between 13 and 42 percent than their non-crisis counterparts.

Bibliographic Details

Main Authors:	Adams-Kane, Jonathon, Caballero, Julian A., Lim, Jamus Jerome
Language:	English en_US
Published:	World Bank, Washington, DC 2013-09
Subjects:	ACCESS TO CREDIT, ACCOUNTING, ASSET PORTFOLIOS, ASSETS, ASSETS RATIO, ASYMMETRIC INFORMATION, AUTONOMY, BALANCE SHEET, BANK BALANCE SHEETS, BANK BEHAVIOR, BANK CLOSURES, BANK CREDIT, BANK FAILURES, BANK HOLDING, BANK HOLDING COMPANIES, BANK LENDING, BANK LIQUIDATIONS, BANK LIQUIDITY, BANK NATIONALIZATIONS, BANK ORIGIN, BANK RESTRUCTURING, BANK RUNS, BANKING CRISES, BANKING CRISIS, BANKING REGULATION, BANKING SECTOR, BANKING SYSTEM, BANKING SYSTEMS, BANKRUPT, BUSINESS CYCLE, BUSINESS CYCLES, CAPITAL FLOWS, CAPITAL MARKET, CAPITAL MARKETS, CAPITAL STRUCTURE, CENTRAL BANK, CHECKS, CLAIM, COLLATERAL, COLLECTION EFFORT, COLLECTION PROCESS, COMMERCIAL BANKS, COOPERATIVE BANKS, CREDIT ACCESS, CREDIT ALLOCATION, CREDIT PROVISION, CRISIS COUNTRIES, CRISIS COUNTRY, CRISIS LENDING, CROSS-BORDER BANKING, CURRENT ACCOUNT, CURRENT ACCOUNT BALANCE, DEPENDENT, DEPOSIT, DEPOSITS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT BANK, DIRECT OWNERSHIP, DOMESTIC BANK, DOMESTIC BANKING, DOMESTIC BANKS, DOMESTIC CURRENCY, DOMESTIC FINANCIAL MARKETS, DOMESTIC LIQUIDITY, ECONOMETRICS, ECONOMIC CRISES, ECONOMIC POLICY, EMERGING ECONOMIES, EMERGING MARKET, EMERGING MARKETS, EMPIRICAL ANALYSIS, EXCHANGE RATES, EXCLUSION, EXPENDITURE, EXPORTERS, FINANCIAL CONTAGION, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL DISTRESS, FINANCIAL GLOBALIZATION, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL INTEGRATION, FINANCIAL INTERMEDIATION, FINANCIAL LIBERALIZATIONS, FINANCIAL MARKETS, FINANCIAL SERVICES, FINANCIAL SHOCKS, FINANCIAL STABILITY, FINANCIAL STUDIES, FINANCIAL SUPPORT, FINANCIAL SYSTEM, FINANCIERS, FINANCING NEEDS, FISCAL POLICY, FISCAL RESTRUCTURING, FOREIGN BANK, FOREIGN BANK ENTRY, FOREIGN BANK PARTICIPATION, FOREIGN BANK PENETRATION, FOREIGN BANKS, FOREIGN ENTRY, FOREIGN LIABILITIES, FOREIGN OWNERSHIP, GLOBALIZATION, HOLDING COMPANY, HOST COUNTRIES, HOST COUNTRY, HOST ECONOMIES, HOST ECONOMY, INDIVIDUAL BANKS, INFLATION, INTEREST MARGIN, INTERNATIONAL BANK, INTERNATIONAL BANK LENDING, INTERNATIONAL BANKING, INTERNATIONAL CREDIT, INTERNATIONAL ECONOMICS, INTERNATIONAL SETTLEMENTS, JUDGMENT, LARGE BANK, LENDERS, LENDING DECISIONS, LIQUIDATIONS, LIQUIDITY MANAGEMENT, LIQUIDITY PROBLEMS, LIQUIDITY SUPPORT, LOAN, LOAN DEMAND, LOAN LOSS, LOAN LOSS PROVISIONS, LOAN MARKET, LOAN PORTFOLIO, LOAN RATIO, MACRO FACTORS, MANDATE, MONETARY AUTHORITIES, MONETARY FUND, MONETARY SHOCKS, MULTINATIONAL, MULTINATIONAL BANK, MULTINATIONAL BANKS, MULTINATIONALS, NONPERFORMING LOANS, NUMBER OF BANKS, OFFSHORE FINANCIAL CENTER, OUTSTANDING LOANS, OWNERSHIP STRUCTURE, PARENT COMPANIES, PARENT COMPANY, PORTFOLIO, POST-CRISIS PERIOD, POST-CRISIS PERIODS, PROFITABILITY, RATES OF INFLATION, RECESSION, REGULATORY POLICY, REPATRIATION, RESERVES, RETURN, SHAREHOLDER, SMALL BUSINESSES, SOLVENCY, STATE BANKS, STOCK MARKET, SUBSIDIARIES, SUBSIDIARY, SYSTEMIC BANKING CRISES, SYSTEMIC BANKING CRISIS, SYSTEMIC CRISES, TAX, TAX REGIME, TRADE FLOWS, TRANSACTION, WHOLESALE FUNDING,
Online Access:	http://documents.worldbank.org/curated/en/2013/09/18194151/foreign-bank-behavior-during-financial-crises https://hdl.handle.net/10986/16041
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