Foreign Banks in Central and Eastern Europe: Asset or Risk Factor?

Maandschrift Economie, Vol. 67, No. 3, pp. 188-209, 2003

21 Pages Posted: 29 Feb 2004  

Ralph de Haas

European Bank for Reconstruction and Development; Tilburg University - Department of Finance

Iman van Lelyveld

De Nederlandsche Bank; VU University Amsterdam - Department of Finance and Financial Sector Management

Abstract

We analyse foreign bank penetration in Central and Eastern Europe (CEE) and its influence on private sector credit, taking into account both cross-border credit and credit by foreign bank subsidiaries. By combining BIS and BankScope data into a unique database we make a clear distinction between these credit categories. We show that the relative importance of foreign bank subsidiaries has increased considerably during recent years. However, in Hungary and Poland foreign banks were also important during the first transition years, as they provided substantial amounts of cross-border credit. We do not find evidence of foreign banks deserting CEE during financial crises or economic downturns. Although cross-border credit did decrease during some periods, foreign banks expanded the credit supply of their subsidiaries simultaneously. This may be an important consideration for (transition) countries that still have to decide whether to open up their markets to foreign bank subsidiaries.

Notes: Downloadable paper is in Dutch.

Keywords: transition countries, foreign banks, financial stability

JEL Classification: F36, G21

Suggested Citation

de Haas, Ralph and van Lelyveld, Iman, Foreign Banks in Central and Eastern Europe: Asset or Risk Factor?. Maandschrift Economie, Vol. 67, No. 3, pp. 188-209, 2003. Available at SSRN: https://ssrn.com/abstract=510642

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

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Iman van Lelyveld

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

VU University Amsterdam - Department of Finance and Financial Sector Management ( email )

De Boelelaan 1105
NL-1081HV Amsterdam
Netherlands

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