The Influence of Bank Ownership on Credit Supply: Evidence from the Recent Financial Crisis

22 Pages Posted: 23 Oct 2012

See all articles by Zuzana Fungáčová

Zuzana Fungáčová

Bank of Finland - Institute for Economies in Transition (BOFIT)

Risto Herrala

European Central Bank (ECB) - Directorate General International and European Relations

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2011

Abstract

This study examines how bank ownership influenced the credit supply during the recent financial crisis in Russia, where the banking sector consists of a mix of state-controlled banks, foreign-owned banks, and domestic private banks. To estimate credit supply changes, we employ an exhaustive dataset for Russian banks that covers the crisis period and apply an original approach based on stochastic frontier analysis. Our findings suggest bank ownership affected credit supply during the financial crisis and that the crisis led to an overall decrease in the credit supply. Relative to domestic private banks foreign-owned banks reduced their credit supply more and state-controlled banks less. This supports the hypothesis that foreign banks have a “lack of loyalty” to domestic actors during a crisis, as well as the view that an objective function of state-controlled banks leads them to support the economy during economic downturns.

Keywords: bank, credit policy, foreign ownership, state ownership, stochastic frontier analysis

JEL Classification: D14, G21

Suggested Citation

Fungacova, Zuzana and Herrala, Risto and Weill, Laurent, The Influence of Bank Ownership on Credit Supply: Evidence from the Recent Financial Crisis (December 1, 2011). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2084084 or http://dx.doi.org/10.2139/ssrn.2084084

Zuzana Fungacova

Bank of Finland - Institute for Economies in Transition (BOFIT) ( email )

Snellmaninaukio
PO Box 160
Helsinki 00101
Finland

HOME PAGE: http://www.bof.fi/bofit_en/index.htm

Risto Herrala

European Central Bank (ECB) - Directorate General International and European Relations ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Laurent Weill (Contact Author)

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

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