Foreign Currency Lending in Emerging Europe: Bank Level Evidence
CentER Discussion Paper Series No. 2010-135
46 Pages Posted: 17 Jan 2011 Last revised: 29 May 2013
Date Written: December 1, 2010
Based on survey data from 193 banks in 20 countries we provide the first bank-level analysis of the determinants of foreign currency (FX) lending in Emerging Europe. We find that FX lending by all banks, regardless of their ownership structure, is strongly determined by the macroeconomic environment. We find no evidence of foreign banks ‘pushing’ FX loans indiscriminately because of easier access to wholesale funding in foreign currency. In fact, while foreign banks do lend more in FX to corporate clients, they do not do so to retail clients. We also find that after a take-over by a foreign bank, the acquired bank does not increase its FX lending any faster than a bank which remains in domestic hands.
Keywords: Foreign currency lending, currency mismatch, foreign banks, financial stability
JEL Classification: D82, G15, G21
Suggested Citation: Suggested Citation