Dissecting Foreign Bank Lending Behavior During the 2008–2009 Crisis

38 Pages Posted: 17 Nov 2016

See all articles by Moon Jung Choi

Moon Jung Choi

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

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Multiple version iconThere are 3 versions of this paper

Date Written: December 2016

Abstract

This paper analyzes the lending behavior of foreign‐owned banks during the recent global crisis. Using bank‐level panel data for 51 countries, 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 in which they operate. Banks from the United States reduced loan growth less than other parent banks. Neither the global nor regional reach of parent banks influenced the lending growth of foreign affiliates. Parent capitalization and not parent funding explained the behavior of foreign bank credit growth during the global crisis. However, funding did affect the lending behavior of domestic and foreign banks in host countries, with those relying more heavily on deposits suffering a smaller decline in bank lending. Although not the focus of the paper, we also find 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 Martinez Peria, Maria Soledad, Dissecting Foreign Bank Lending Behavior During the 2008–2009 Crisis (December 2016). Financial Markets, Institutions & Instruments, Vol. 25, Issue 5, pp. 361-398, 2016. Available at SSRN: https://ssrn.com/abstract=2870124 or http://dx.doi.org/10.1111/fmii.12076

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)

Maria Soledad Martinez Peria

International Monetary Fund (IMF) ( email )

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

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