Working Paper: CEPR ID: DP10194
Authors: Stijn Claessens; Neeltje van Horen
Abstract: Although cross-border bank lending has fallen sharply since the crisis, extending our bank ownership database from 1995-2009 up to 2013 shows only limited retrenchment in foreign bank presence. While banks from OECD countries reduced their foreign presence (but still represent 89% of foreign bank assets), those from emerging markets and developing countries expanded abroad and doubled their presence. Especially advanced countries hit by a systemic crisis reduced their presence abroad, with far flung and relatively small investments more likely to be sold. Poorer and slower growing countries host fewer banks today, while large investments less likely expanded. Conversely, faster host countries? growth and closeness to potential investors meant more entry. Lending by foreign banks locally grew more than cross-border bank claims did for the same home-host country combination, and each was driven by different factors. Altogether, our evidence shows that global banking is not becoming more fragmented, but rather is going through some important structural transformations with a greater variety of players and a more regional focus.
Keywords: cross-border banking; financial fragmentation; financial globalization; foreign banks; global financial crisis
JEL Codes: F21; F23; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| global financial crisis (F65) | changes in foreign bank presence (F65) |
| home country's financial distress (F65) | decrease in foreign bank presence (F65) |
| host country's slower growth (O57) | less local foreign bank activity (F65) |
| systemic crises at home (H12) | less representation abroad (F29) |
| local lending by foreign banks (F34) | more stable compared to cross-border claims (F34) |