Foreign Bank Presence in Developing Countries 1995-2006: Data and Trends

Abstract

This paper describes an extensive data collection effort on foreign bank entry and documents important trends and patterns in foreign banks' presence. The data collected cover the period 1995-2006 and include the full bilateral matrix of individual bank source and host countries, and the mode of entry. We document that there has been a sharp increase in foreign bank presence in most regions over this period, with especially low and lower middle income countries observing much new entry. We also show that banks from developing countries are becoming more prominent investors, especially in small developing countries and countries where income levels are low. Even though many of these banks are small in comparison to their high-income counterparts, they are very significant in many of the markets they do business in. The paper concludes, however, that the exact determinants of this changing pattern in foreign bank entry and its implications for domestic banking system performance - in terms of efficiency, competitiveness, access to finance and stability - remain to be investigated.

Keywords: foreign direct investment, international banking, cross-border banking

JEL Classification: F21, F23, G21