Foreign Banks and the Vienna Initiative: Turning Sinners into Saints?

42 Pages Posted: 9 Aug 2012

See all articles by Ralph De Haas

Ralph De Haas

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

Yevgeniya Korniyenko

European Bank for Reconstruction and Development (EBRD)

Elena Loukoianova

International Monetary Fund (IMF)

Alexander Pivovarsky

Harvard University

Date Written: May 2012

Abstract

We use data on 1,294 banks in Central and Eastern Europe to analyze how bank ownership and creditor coordination in the form of the Vienna Initiative affected credit growth during the 2008–09 crisis. As part of the Vienna Initiative western European banks signed country-specific commitment letters in which they pledged to maintain exposures and to support their subsidiaries in Central and Eastern Europe. We show that both domestic and foreign banks sharply curtailed credit during the crisis, but that foreign banks that participated in the Vienna Initiative were relatively stable lenders. We find no evidence of negative spillovers from countries where banks signed commitment letters to countries where they did not.

Keywords: Foreign Banks, Vienna Initiative, State Support, Bank Supervision, Credit Expansion, Eastern Europe, Global Financial Crisis 2008-2009

JEL Classification: C23, F36, G21, P34

Suggested Citation

De Haas, Ralph and Korniyenko, Yevgeniya and Loukoianova, Elena and Pivovarsky, Alexander, Foreign Banks and the Vienna Initiative: Turning Sinners into Saints? (May 2012). IMF Working Paper No. 12/117. Available at SSRN: https://ssrn.com/abstract=2127012

Ralph De Haas (Contact Author)

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

Yevgeniya Korniyenko

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Elena Loukoianova

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Alexander Pivovarsky

Harvard University ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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