Taming the Herd? Foreign Banks, the Vienna Initiative and Crisis Transmission

31 Pages Posted: 22 Feb 2014 Last revised: 15 Jul 2014

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)

Alexander Pivovarsky

Harvard University

Teodora Tsankova

European Bank for Reconstruction and Development (EBRD)

Date Written: February 20, 2014

Abstract

We use detailed data on over 350 banks in emerging Europe to analyze how bank ownership and the Vienna Initiative impacted credit growth during the Great Recession. 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 emerging Europe. We show that while both domestic and foreign banks sharply curtailed credit during the financial crisis, 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: Global banking, Vienna Initiative, Financial crisis

JEL Classification: F36, G21, P34

Suggested Citation

De Haas, Ralph and Korniyenko, Yevgeniya and Pivovarsky, Alexander and Tsankova, Teodora, Taming the Herd? Foreign Banks, the Vienna Initiative and Crisis Transmission (February 20, 2014). Journal of Financial Intermediation, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2399094

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

Alexander Pivovarsky

Harvard University ( email )

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

Teodora Tsankova

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

One Exchange Square
London, EC2A 2EH
United Kingdom

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