Foreign Banks and Foreign Currency Lending in Emerging Europe

42 Pages Posted: 18 Jan 2012

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: January 2012

Abstract

Based on survey data from 193 banks in 20 countries we provide the first bank‐level analysis of the relationship between bank ownership, bank funding and foreign currency (FX) lending across emerging Europe. Our results contradict the widespread view that foreign banks have been driving FX lending to retail clients as a result of easier access to foreign wholesale funding. Our cross‐sectional analysis shows that foreign banks do lend more in FX to corporate clients but not to households. Moreover, we find no evidence that wholesale funding had a strong causal effect on FX lending for either foreign or domestic banks. Panel estimations show that the foreign acquisition of a domestic bank does lead to faster growth in FX lending to households. However, this is driven by faster growth in household lending in general not by a shift towards FX lending.

Suggested Citation

Brown, Martin and De Haas, Ralph, Foreign Banks and Foreign Currency Lending in Emerging Europe (January 2012). Economic Policy, Vol. 27, Issue 69, pp. 57-98, 2012. Available at SSRN: https://ssrn.com/abstract=1987316 or http://dx.doi.org/10.1111/j.1468-0327.2011.00277.x

Martin Brown

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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