German Bank Lending During Financial Crises: A Bank Level Analysis

Abstract

This paper studies German bank lending during the Asian and Russian crises, using a bank level data set from the Deutsche Bundesbank. Our aim is to gain more insight into the pattern of German bank lending during financial crises in emerging markets. We find that German banks reacted to the Asian crisis mainly by reallocating their portfolios among emerging markets. By contrast, the banks' behavior during the Russian crisis is characterized by a general withdrawal from emerging markets. We find that the lending of large commercial banks was less stable than the lending of public sector banks during the Asian crisis. Differences were not as pronounced during the Russian crisis.

Keywords: Banking, currency crises, emerging markets crises, contagion, financial stability, bank lending

JEL Classification: F30, F32, F34