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Concentration in Asia's cross‐border banking: Determinants and impacts

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  • Ana Kristel Lapid
  • Rogelio Mercado
  • Peter Rosenkranz

Abstract

Cross‐border bank positions in Asia and the Pacific remain highly concentrated among a few counterparties, exposing the region to financial risks and policy spillovers. Consequently, assessing the determinants and impacts of the region's cross‐border banking concentration is relevant to the design of appropriate policies for promoting financial development and safeguarding financial stability. To this end, we construct cross‐border bank concentration measures for 47 economies in Asia and the Pacific from 2000 to 2019. The results show that higher capital account and trade openness and per capita income are significantly associated with lower cross‐border bank concentration. Moreover, elevated cross‐border bank concentration tends to lower domestic credit and nonperforming loans. We find no impact on bank profitability for the region.

Suggested Citation

  • Ana Kristel Lapid & Rogelio Mercado & Peter Rosenkranz, 2023. "Concentration in Asia's cross‐border banking: Determinants and impacts," Pacific Economic Review, Wiley Blackwell, vol. 28(2), pages 267-292, May.
    • Handle: RePEc:bla:pacecr:v:28:y:2023:i:2:p:267-292
    DOI: 10.1111/1468-0106.12399
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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