20.8.2013
at 10:30
Rima Turk Ariss (Lebanese American University, Lebanon): Foreign banks during financial crises
Foreign banks during financial crises (with Allen Berger and Tanakorn Makaew - first draft)
This paper examines lending behavior of foreign and domestic banks during normal times and financial crises. We first find that foreign banks are more conservative than domestic banks. During normal times, foreign banks tend to have safer balance sheets, safer loan contracts (smaller loans with lower spreads and shorter maturities), and safer borrowers. Second, we find that the 2008 financial crisis led to a sharp decline in bank loans and profits. This decline is smaller for foreign banks. Third, at the individual loan level, the crisis resulted in decreases in loan size, number of loans, and maturities, as well as increases in loan spreads. The contraction in loan terms is smaller for foreign banks. Fourth, the differential reactions between foreign and domestic banks can be explained completely by the differences in borrower composition and deal characteristics. There is no significant difference between foreign and domestic banks after controlling for borrower and deal characteristics. Overall, our results suggest that loan-level analyses are crucial for the understanding of foreign and domestic banks behavior during financial crises.
This paper examines lending behavior of foreign and domestic banks during normal times and financial crises. We first find that foreign banks are more conservative than domestic banks. During normal times, foreign banks tend to have safer balance sheets, safer loan contracts (smaller loans with lower spreads and shorter maturities), and safer borrowers. Second, we find that the 2008 financial crisis led to a sharp decline in bank loans and profits. This decline is smaller for foreign banks. Third, at the individual loan level, the crisis resulted in decreases in loan size, number of loans, and maturities, as well as increases in loan spreads. The contraction in loan terms is smaller for foreign banks. Fourth, the differential reactions between foreign and domestic banks can be explained completely by the differences in borrower composition and deal characteristics. There is no significant difference between foreign and domestic banks after controlling for borrower and deal characteristics. Overall, our results suggest that loan-level analyses are crucial for the understanding of foreign and domestic banks behavior during financial crises.
BOFIT seminars
The seminars are open to all economists interested in the subject areas covered.
You need to pre-register for the seminar with
Ms India Roland (firstname.lastname@bof.fi, phone +358 10 831 2268).
Seminar will be held at Rauhankatu 19, 3rd floor seminar room (arrive at the Bank's Rauhankatu 19 entrance, from where you will be escorted to the BOFIT seminar room).
The seminars are open to all economists interested in the subject areas covered.
You need to pre-register for the seminar with
Ms India Roland (firstname.lastname@bof.fi, phone +358 10 831 2268).
Seminar will be held at Rauhankatu 19, 3rd floor seminar room (arrive at the Bank's Rauhankatu 19 entrance, from where you will be escorted to the BOFIT seminar room).