Foreign Bank Entry: Experience, Implications for Developing Countries, and Agenda for Further Research

41 Pages Posted: 3 Oct 2001

See all articles by George R. G. Clarke

George R. G. Clarke

Texas A&M International University - A.R. Sanchez Jr., School of Business

Robert Cull

World Bank - Development Research Group (DECRG)

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Susana M. Sanchez

World Bank - Development Research Group (DECRG)

Date Written: October 2001

Abstract

Foreign banks are playing an increasingly large role in many developing countries, holding more than 50 percent of banking assets in several of these countries. But important issues about foreign bank entry continue to be debated.

In recent years foreign bank participation has increased tremendously in several developing countries. In Argentina, Chile, the Czech Republic, Hungary, and Poland, for example, more than 50 percent of banking assets are now in foreign-controlled banks. In Asia, Africa, the Middle East, and the former Soviet Union the rate of entry by foreign banks has been slower, but the trend is similar.

Although the number of countries welcoming foreign banks is growing, many questions about foreign bank entry are still being debated, including:

• What draws foreign banks to a country?

• Which banks expand abroad?

• What do foreign banks do once they arrive?

• How does the mode of a bank's entry - for example, as a branch of its parent or as an independent subsidiary company - affect its behavior?

Clarke and his coauthors summarize current knowledge on these issues. In addition, since the existing literature focuses heavily on industrial countries, they put forth an agenda for further study of the effects of foreign bank entry in developing countries.

This paper - a product of the Office of the Senior Vice President, Development Economics - is a background paper for World Development Report 2002: Institutions for Markets. The authors may be contacted at gclarke@worldbank.org, rcull@worldbank.org, mmartinezperia@worldbank.org, or ssanchez@worldbank.org.

JEL Classification: G21

Suggested Citation

Clarke, George and Cull, Robert and Martinez Peria, Maria Soledad and Sanchez, Susana M., Foreign Bank Entry: Experience, Implications for Developing Countries, and Agenda for Further Research (October 2001). World Bank Policy Research Working Paper No. 2698. Available at SSRN: https://ssrn.com/abstract=285769

George Clarke

Texas A&M International University - A.R. Sanchez Jr., School of Business ( email )

5201 University Blvd.
Laredo, TX 78041-1900
United States

Robert Cull

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-6365 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/rcull

Maria Soledad Martinez Peria (Contact Author)

International Monetary Fund (IMF) ( email )

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

Susana M. Sanchez

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
(202)473-1856 (Phone)

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