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Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe

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  • Ralph de Haas

    (De Nederlandsche Bank)

  • Iman van Lelyveld

    (De Nederlandsche Bank)

Abstract

We analyse foreign bank penetration in Central and Eastern Europe (CEE)and its influence on private sector credit,taking into account both cross-border credit and credit by foreign bank subsidiaries. By combining BIS and BankScope data into a unique database we make a clear distinction between these credit categories.We show that the relative importance of foreign bank subsidiaries has increased considerably during recent years.However,in Hungary and Poland foreign banks were also important during the first transition years,as they provided substantial amounts of cross-border credit.We do not find evidence of foreign banks deserting CEE during financial crises or economic downturns.Although cross-border credit did decrease during some periods,foreign banks expanded the credit supply of their subsidiaries simultaneously.This may be an important consideration for (transition)countries that still have to decide whether to open up their markets to foreign bank subsidiaries.

Suggested Citation

  • Ralph de Haas & Iman van Lelyveld, 2002. "Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe," International Finance 0209002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpif:0209002
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    More about this item

    Keywords

    foreign banks; cross-border credit; transition economies;
    All these keywords.

    JEL classification:

    • 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

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