Foreign Bank Participation and Crises in Developing Countries

43 Pages Posted: 20 Apr 2016

See all articles by Robert Cull

Robert Cull

World Bank - Development Research Group (DECRG)

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Date Written: February 1, 2007

Abstract

This paper describes the recent trends in foreign bank ownership in developing countries, summarizes the existing evidence on the causes and implications of foreign bank presence, and reexamines the link between banking crises and foreign bank participation. Using data on the share of banking sector assets held by foreign banks in over 100 developing countries during 1995-2002, the results show that countries that experienced a banking crisis tended to have higher levels of foreign bank participation than those that did not. Furthermore, panel regressions indicate that foreign participation increased as a result of crises rather than prior to them. However, post-crisis increases in foreign participation did not coincide with increased credit to the private sector, perhaps because in many cases foreign banks acquired distressed banks.

Keywords: Banks & Banking Reform, Foreign Direct Investment, Corporate Law, Privatization, Financial Crisis Management & Restructuring

Suggested Citation

Cull, Robert and Martinez Peria, Maria Soledad, Foreign Bank Participation and Crises in Developing Countries (February 1, 2007). World Bank Policy Research Working Paper No. 4128. Available at SSRN: https://ssrn.com/abstract=961096

Robert Cull (Contact Author)

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

International Monetary Fund (IMF) ( email )

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

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