Foreign Currency Lending in Emerging Europe: Bank Level Evidence

European Banking Center Discussion Paper No. 2010-31

CentER Discussion Paper Series No. 2010-135

46 Pages Posted: 17 Jan 2011 Last revised: 29 May 2013

See all articles by Martin Brown

Martin Brown

University of St. Gallen

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); Tilburg University - Department of Finance

Date Written: December 1, 2010

Abstract

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

Brown, Martin and De Haas, Ralph, Foreign Currency Lending in Emerging Europe: Bank Level Evidence (December 1, 2010). European Banking Center Discussion Paper No. 2010-31. Available at SSRN: https://ssrn.com/abstract=1740449 or http://dx.doi.org/10.2139/ssrn.1740449

Martin Brown (Contact Author)

University of St. Gallen ( email )

Unterer Graben 21
St. Gallen, CH-9000
Switzerland

Ralph De Haas

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom

HOME PAGE: www.ebrd.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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