The Impact of Funding Models and Foreign Bank Ownership on Bank Credit Growth : Is Central and Eastern Europe Different?
This paper provides new evidence on the factors affecting protracted credit contraction in the wake of the global financial crisis. The paper applies panel vector autoregressions to a global panel that consists of quarterly data for 41 countries fo...
| Main Authors: | , , , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/02/19007915/impact-funding-models-foreign-bank-ownership-bank-credit-growth-central-eastern-europe-different http://hdl.handle.net/10986/17341 |
| Summary: | This paper provides new evidence on the
factors affecting protracted credit contraction in the wake
of the global financial crisis. The paper applies panel
vector autoregressions to a global panel that consists of
quarterly data for 41 countries for the period 2000-2011 and
documents that domestic private credit growth is highly
sensitive to cross-border funding shocks around the world.
This relationship is significantly stronger in Central and
Eastern Europe, a region with considerably stronger foreign
presence, higher cross-border funding, and elevated
loan-to-deposit ratios compared with the rest of the world.
The paper shows that high foreign ownership per se does not
appear to explain credit response differences to foreign
funding shocks. Rather, there is a stronger response in
countries that exhibit high loan-to-deposit ratios and a
high reliance on foreign funding relative to local deposits.
The results suggest that funding model differences were at
the heart of the post-crisis credit contraction in several
Central and Eastern European countries. These findings have
important regulatory and supervisory implications for
emerging countries in Central and Eastern Europe as well as
for other countries. |
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