Dissecting Foreign Bank Lending Behavior During the 2008-2009 Crisis

37 Pages Posted: 28 Mar 2015

See all articles by Moon Jung Choi

Moon Jung Choi

The Bank of Korea; Bank of Korea - Economic Research Institute

Eva Gutierrez

World Bank

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Multiple version iconThere are 3 versions of this paper

Date Written: April 4, 2014

Abstract

This paper analyzes the lending behavior of foreign-owned banks during the recent global crisis. Using bank-level panel data for countries in Central and Eastern Europe, East Asia, and Latin America, the paper explores the role of affiliate and parent financial characteristics, host location, as well as the impact of parent geographic origin and reach on foreign banks’ credit growth.

Overall, the analysis finds robust evidence that foreign banks curtailed the growth of credit relative to other banks, independent of the host region. Foreign bank affiliates from the United States reduced loan growth less than those from other regions. The lending growth of foreign affiliates does not depend on whether their parent banks are global or regional banks. However, the funding structure of foreign bank affiliates and the capitalization of parent banks do help explain the lending behavior of foreign affiliates during the global crisis. Although not the focus of the paper, it also finds that government-owned banks played a countercyclical role in all regions.

Keywords: foreign banks, financial globalization, bank lending, crisis

JEL Classification: F21, F23, F65, G21

Suggested Citation

Choi, Moon Jung and Gutierrez, Eva and Martinez Peria, Maria Soledad, Dissecting Foreign Bank Lending Behavior During the 2008-2009 Crisis (April 4, 2014). Bank of Korea WP 2014-7. Available at SSRN: https://ssrn.com/abstract=2580601 or http://dx.doi.org/10.2139/ssrn.2580601

Moon Jung Choi (Contact Author)

The Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Bank of Korea - Economic Research Institute ( email )

110, 3-Ga, Namdaemunno, Jung-Gu
Seoul 100-794
Korea, Republic of (South Korea)

Eva Gutierrez

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Maria Soledad Martinez Peria

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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