Foreign-Owned Banks (eBook)

Małgorzata Iwanicz-Drozdowska is a full professor of finance at Warsaw School of Economics, Poland, and the head of the Financial System Department in the Institute of Finance.Paola Bongini is a professor of banking and finance at the University of Milan-Bicocca, Italy. She is dean of the undergraduate taught course in banking and finance and the postgraduate degree in economics and finance.Pawel Smaga is an assistant professor in the Institute of Finance at Warsaw School of Economics, Poland, and a senior economist at the National Bank of Poland.Bartosz Witkowski is an associate professor in the Institute of Econometrics at Warsaw School of Economics, Poland. His research specialization includes panel data analysis and its application in economics and finance.

Contents 6
List of Figures 8
List of Maps 12
List of Tables 13
Chapter 1: Introduction 15
Bibliography 17
Chapter 2: CESEE Countries: Historical Background, Transition, and Development 19
2.1 A Brief History of CESEE Countries 19
2.2 Economic and Political Transition 21
2.3 How Developed Are CESEE Countries? 25
2.4 What Are the Development Driving Forces? 29
Bibliography 31
Chapter 3: Foreign Bank Entry into CESEE Countries in the 1990s and Afterwards 33
3.1 Why Did Foreign Banks Decide to Enter? 33
3.2 Entry Strategies and Organizational Forms 55
3.3 Performance of Foreign-Owned Banks 61
3.4 Conclusions 73
Bibliography 74
Chapter 4: Credit Activity of Foreign-Owned Banks in CESEE 78
4.1 What Drives Credit Growth in CESEE? 78
4.1.1 Credit Growth: The Pre- and Post-crisis Picture 78
4.1.2 Empirical Analysis of Credit Growth 81
4.2 Are Foreign-Owned Banks More or Less Procyclical than Domestic-Owned Banks?2 91
4.2.1 Cyclicality of Foreign-Owned Banks’ Lending 91
4.2.2 Measuring Bank Credit Procyclicality in the CESEEs 92
Bibliography 97
Chapter 5: Impact of Foreign-Owned Banks on Financial Stability 102
5.1 Global Financial Crisis in the Context of CESEE 102
5.1.1 “State of Play” in CESEE Before the Crisis 102
5.1.2 The Perils of FX Lending 107
5.1.3 Unsustainable Credit Cycles in CESEEs: From Boom to Bust 108
5.1.4 Macrofinancial Impact of the Global Financial Crisis 112
5.1.5 Reponses to the Crisis 121
5.2 Measures of Financial Stability in CESEE Countries11 134
5.3 Do Foreign-Owned Banks Promote Financial Stability? Differences Between Foreign-Owned and Domestic-Owned Banks16 149
5.3.1 Financial Strength Index and Z-Score 152
5.4 What Drives Financial Stability in CESEE Banking Sectors?21 158
5.5 Financial Stability Outlook in the CESEEs 164
Bibliography 170
Chapter 6: Impact of Foreign-Owned Banks on Economic Development 181
6.1 Economic Growth and Financial Development: Theory and Evidence 181
6.2 Finance and Growth in CESEE Countries 193
6.3 Is Foreign Bank Credit Growth-Enhancing? 203
6.4 Foreign Ownership in CESEE Countries: Evidence from a Large Sample and Extended Sample Period 208
6.4.1 Measures of Macroeconomic Environment 211
6.4.2 Measures of Institutional Environment 211
6.4.3 Measures of Financial Development and Foreign Ownership 211
6.4.4 The Model 212
6.5 Conclusions 216
Bibliography 217
Chapter 7: Concluding Remarks: Who Is the Winner of Foreign Banks’ Presence? 225
Bibliography 227
Index 228