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2018 | Book

Introduction Read chapter Read first chapter

Foreign-Owned Banks

The Role of Ownership in Post-Communist European Countries

Authors: Prof. Małgorzata Iwanicz-Drozdowska, Prof. Paola Bongini, Dr. Paweł Smaga, Prof. Bartosz Witkowski

Publisher: Springer International Publishing

Book Series : Studies in Economic Transition

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

This book provides an in-depth analysis of the role of foreign-owned banks for credit growth, financial stability and economic growth in the post-communist European countries. Using data covering 20 countries over the period from 1995 to 2015, the authors analyse the evolution of banking sectors in CESEE after the transformation in the historical context. This helps draw a new picture of the role of financial development and EU accession in that region, being also a lesson for other countries or regions in transition. Additionally, as the Global Financial Crisis has left a stigma in banking sectors, the book shows its impact on the post-communist banking sectors. As the foreign banks dominate the banking sectors in CESEE countries (the stake of foreign-owned banks is below 50% of assets in only five out of 20 countries), their strategies materially impact the development of CESEE banking sectors, which warrants our scientific exploration.

Arriving at a clear concluding point of view on the role of foreign-owned banks and providing insights for future policy of CESEEs towards foreign presence in their banking sectors, this book should be of interest to academics, students, and policymakers.

Table of Contents

Frontmatter
Chapter 1. Introduction
Abstract
In this introductory chapter, we present the concept and structure of the book. We also explain why the topic of our book is important to countries in Central, Eastern, and South-Eastern Europe (CESEE). Various stakeholders should be acquainted with pros and cons for foreign capital presence in the financial sector in emerging markets in order to understand its impact and to shape the economic policy adequately. It may also help other countries facing similar challenges of changing their economic systems to follow the same path or to avoid potential mistakes.
Małgorzata Iwanicz-Drozdowska
Chapter 2. CESEE Countries: Historical Background, Transition, and Development
Abstract
The history of the CESEE has been stormy over time. Its strategic geographical location and the policy of conquest by neighbouring countries, such as Austria, Prussia, Russia, and Turkey, have significantly impacted the development of societies and economies of CESEE. After World War II, the CESEE countries found themselves behind the Iron Curtain and were under total influence of the Soviet Union. The situation changed in the late 1980s when communism started to collapse in the Eastern Bloc. From then on, the CESEE countries have begun to move from centrally planned towards market economies. This is the reason why they have been referred to as transition economies. In this chapter, we present a brief history of this region, with special attention paid to the period of transition.
Małgorzata Iwanicz-Drozdowska
Chapter 3. Foreign Bank Entry into CESEE Countries in the 1990s and Afterwards
Abstract
This chapter deals with the theory and evidence of multinational banking and applies it to the specific experience of the CESEE countries which faced an extraordinary interest by foreign investors willing to enter their banking sectors. The CESEE countries are the unique regional markets in the world where foreign ownership is predominant and where foreign players compete directly with local banks. This chapter aims to present and evaluate the experience of the CESEE countries with respect to foreign banking by looking at the underlying decisions to expand in these countries by major foreign players, mainly Western European banks, and the preferred entry mode. The chapter also takes a microeconomic approach, examining the overall performance of foreign-owned vis-à-vis domestically owned banks.
Paola Bongini
Chapter 4. Credit Activity of Foreign-Owned Banks in CESEE
Abstract
In this chapter we analyse the credit activity of banks in the CESEE countries, with special attention paid to the foreign-owned banks. We start our empirical analysis with the determinants of the credit growth, focusing next on the procyclicality of credit activities. Foreign-owned banks are analysed against the background of other banks operating in CESEE, with the distinction of domestic-owned, state-owned, and owned by development banks, including other non-bank financial institutions. Moreover, the credit activity of banks opens the door to a further analysis of financial stability and economic growth because bank credit is regarded as an important determinant of both of them.
Małgorzata Iwanicz-Drozdowska, Paweł Smaga, Bartosz Witkowski
Chapter 5. Impact of Foreign-Owned Banks on Financial Stability
Abstract
This chapter characterizes the stability of banking sectors in the CESEE countries before, during, and after the global financial crisis, while focusing on the role played by foreign-owned banks. The starting point is the analysis of the impact of the crisis in the region, as well as the policy and regulatory responses aimed at containing the effects of materialization of systemic risks and contagion from parent banks. Further, focus is put on potential measures of financial stability in the banking sector from both theoretical and empirical perspectives of the CESEE countries. The last part of the chapter includes an empirical investigation of the factors which determine banking sector’s stability in the CESEEs and the potential role of foreign-owned banks.
Małgorzata Iwanicz-Drozdowska, Paweł Smaga, Bartosz Witkowski
Chapter 6. Impact of Foreign-Owned Banks on Economic Development
Abstract
This chapter reviews the theoretical and empirical literature which links economic growth to the role and characteristics of the financial system. Among these characteristics, relevant to CESEE countries, stand the presence of foreign-owned banks and their activities in the host market. The chapter starts with a review of the main findings of the finance and growth theory and empirics; it then concentrates on specific findings for our group of countries. It finally reports the results of a series of studies targeting the role of foreign-owned banks in influencing the economic path of host countries.
Małgorzata Iwanicz-Drozdowska, Paola Bongini, Paweł Smaga, Bartosz Witkowski
Chapter 7. Concluding Remarks: Who Is the Winner of Foreign Banks’ Presence?
Abstract
In this final chapter, we outline—against the background of our research—the winners of foreign banks’ presence. We also point out what would be needed to assess the impact even more deeply and comprehensively. However, the data needed for this purpose are not publicly available for the entire period of our analysis. Therefore, we are aware of the limitations of our study, but as John Maynard Keynes put it, “It is better to be roughly right than precisely wrong.”
Małgorzata Iwanicz-Drozdowska
Backmatter
Metadata
Title
Foreign-Owned Banks
Authors
Prof. Małgorzata Iwanicz-Drozdowska
Prof. Paola Bongini
Dr. Paweł Smaga
Prof. Bartosz Witkowski
Copyright Year
2018
Electronic ISBN
978-3-030-01111-6
Print ISBN
978-3-030-01110-9
DOI
https://doi.org/10.1007/978-3-030-01111-6