Comparative Economic Studies

, Volume 56, Issue 2, pp 271–282 | Cite as

The Dark and the Bright Side of Global Banking: A (Somewhat) Cautionary Tale from Emerging Europe

  • Ralph De Haas
Symposium Article


This paper reviews the literature on the benefits and risks of global banking, with a focus on emerging Europe. It argues that while the potential destabilising impact of global banks was well understood before the recent financial crisis, the sheer magnitude of this impact in the case of systemically relevant foreign bank subsidiaries was under-appreciated. A second lesson from the crisis is that banks’ funding structure, in particular the use of short-term wholesale funding, matters as much for lending stability as does their ownership structure.


global banks financial crisis bank funding 

JEL Classifications

F65 G01 G21 


  1. Arena, M, Reinhart, C and Vázquez, F . 2007: The lending channel in emerging economies: Are foreign banks different? IMF Working Paper No. 07, International Monetary Fund: Washington DC.Google Scholar
  2. Barajas, A and Steiner, R . 2002: Credit stagnation in Latin America. IMF Working Paper No. 53, International Monetary Fund: Washington DC.Google Scholar
  3. Barba Navaretti, G, Calzolari, G, Pozzolo, AF and Levi, M . 2010: Multinational banking in Europe: Financial stability and regulatory implications. Lessons from the financial crisis. Economic Policy 25 (64): 703–753.CrossRefGoogle Scholar
  4. Beck, T, Degryse, H, De Haas, R and Van Horen, N . 2014: When arm’s length is too far. Relationship banking over the business cycle (mimeo).Google Scholar
  5. Beck, T, Ioannidou, V and Schäfer, L . 2012: Foreigners vs. natives: Bank lending technologies and loan pricing. CentER Discussion Paper No. 55, Tilburg University.Google Scholar
  6. Beck, T and Martinez Peria, MS . 2010: Foreign bank participation and outreach: Evidence from Mexico. Journal of Financial Intermediation 19 (1): 52–73.CrossRefGoogle Scholar
  7. Beltratti, A and Stulz, RM . 2012: The Credit Crisis Around the Globe: Why Did Some Banks Perform Better. Journal of Financial Economics 105 (1): 1–17.CrossRefGoogle Scholar
  8. Berger, AN and Udell, GF . 1995: Relationship lending and lines of credit in small business finance. Journal of Business 68 (3): 351–382.CrossRefGoogle Scholar
  9. Bonin, JP, Hasan, I and Wachtel, P . 2005: Bank performance, efficiency and ownership in transition economies. Journal of Banking & Finance 29 (1): 31–53.CrossRefGoogle Scholar
  10. Brown, M and De Haas, R . 2012: Foreign currency lending in emerging Europe: Bank-level evidence. Economic Policy 27 (69): 59–98.CrossRefGoogle Scholar
  11. Brown, M, De Haas, R and Sokolov, V . 2013: Regional inflation and financial dollarization, EBRD Working Paper No. 163, European Bank for Reconstruction and Development, London.Google Scholar
  12. Cetorelli, N and Goldberg, L . 2011: Global banks and international shock transmission: Evidence from the crisis. IMF Economic Review 59 (1): 41–76.CrossRefGoogle Scholar
  13. Cetorelli, N and Goldberg, L . 2012: Liquidity management of US global banks: Internal capital markets in the Great Recession. Journal of International Economics 88 (2): 299–311.CrossRefGoogle Scholar
  14. Cihák, M and Poghosyan, T . 2009: Distress in European banks: An analysis based on a new data set. IMF Working Paper No. WP/09/9, International Monetary Fund, Washington DC.Google Scholar
  15. Claessens, S, Demirgüç-Kunt, A and Huizinga, H . 2001: How does foreign entry affect domestic banking markets? Journal of Banking & Finance 25 (5): 891–911.CrossRefGoogle Scholar
  16. Claessens, S and Van Horen, N . 2014: Foreign banks: Trends, impact and financial stability. Journal of Money, Credit and Banking 46 (1): 295–326.CrossRefGoogle Scholar
  17. Cornett, MM, McNutt, JJ, Strahan, PE and Hassan, T . 2011: Liquidity Risk Management and Credit Supply in the Financial Crisis. Journal of Financial Economics 101 (2): 297–312.CrossRefGoogle Scholar
  18. Crystal, JS, Dages, BG and Goldberg, LS . 2002: Has foreign bank entry led to sounder banks in Latin America? Current Issues in Economics and Finance 8 (1): 1–6.Google Scholar
  19. Cull, R and Martinez Peria, MS . 2007: Foreign bank participation and crises in developing countries. World Bank Policy Research Working Paper No. 4128, World Bank: Washington DC.Google Scholar
  20. Dages, BG, Goldberg, LS and Kinney, D . 2000: Foreign and domestic bank participation in emerging markets: Lessons from Mexico and Argentina. Federal Reserve Bank of New York Economic Policy Review (September): 17–36.Google Scholar
  21. De Haas, R, Ferreira, D and Taci, A . 2010: What determines the composition of banks’ loan portfolios? Evidence from transition countries. Journal of Banking & Finance 34 (2): 388–398.CrossRefGoogle Scholar
  22. De Haas, R and Kirschenmann, K . 2014: Powerful parents? The local impact of banks’ global business models (mimeo).Google Scholar
  23. De Haas, R, Korniyenko, Y, Pivovarsky, A and Tsankova, T . 2014: Taming the herd? Foreign banks, the Vienna initiative and crisis transmission.Google Scholar
  24. De Haas, R and Naaborg, I . 2006: Foreign banks in transition countries: To whom do they lend and how are they financed? Financial Markets, Institutions & Instruments 15 (4): 159–199.CrossRefGoogle Scholar
  25. De Haas, R and Van Horen, N . 2012: International shock transmission after the Lehman brothers collapse. Evidence from syndicated lending. American Economic Review Papers & Proceedings 102 (3): 231–237.CrossRefGoogle Scholar
  26. De Haas, R and Van Horen, N . 2013: Running for the exit? International bank lending during a financial crisis. Review of Financial Studies 26 (1): 244–285.CrossRefGoogle Scholar
  27. De Haas, R and Van Lelyveld, I . 2004: Foreign bank penetration and private sector credit in Central and Eastern Europe. Journal of Emerging Market Finance 3 (2): 125–151.CrossRefGoogle Scholar
  28. De Haas, R and Van Lelyveld, I . 2006: Foreign banks and credit stability in Central and Eastern Europe. A panel data analysis. Journal of Banking & Finance 30 (7): 1927–1952.CrossRefGoogle Scholar
  29. De Haas, R and Van Lelyveld, I . 2010: Internal capital markets and lending by multinational bank subsidiaries. Journal of Financial Intermediation 19 (1): 1–25.CrossRefGoogle Scholar
  30. De Haas, R and Van Lelyveld, I . 2014: Multinational banks and the global financial crisis: Weathering the perfect storm? Journal of Money, Credit, and Banking 46 (1): 333–364.CrossRefGoogle Scholar
  31. De la Torre, A, Martínez Pería, MS and Schmukler, SL . 2010: Bank involvement with SMEs: Beyond relationship lending. Journal of Banking & Finance 34 (9): 2280–2293.CrossRefGoogle Scholar
  32. Detragiache, E, Tressel, T and Gupta, P . 2008: Foreign banks in poor countries: Theory and evidence. Journal of Finance 63 (5): 2123–2160.CrossRefGoogle Scholar
  33. EBRD. 2009: Transition report 2009. EBRD: London.Google Scholar
  34. Fries, S and Taci, A . 2005: Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries. Journal of Banking & Finance 29 (1): 55–81.CrossRefGoogle Scholar
  35. García Herrero, A and Martínez Pería, MS . 2007: The mix of international banks’ foreign claims: Determinants and implications. Journal of Banking and Finance 31 (6): 1613–1631.CrossRefGoogle Scholar
  36. Giannetti, M and Ongena, S . 2008: ‘Lending by example’: Direct and indirect effects of foreign banks in emerging markets. Journal of International Economics 86 (1): 167–180.CrossRefGoogle Scholar
  37. Gill, I and Raiser, M . 2012: Golden growth: Restoring the luster of the European economic model. World Bank: Washington DC.Google Scholar
  38. Goldberg, LS . 2001: When is US bank lending to emerging markets volatile? NBER Working Paper No. 8209, National Bureau of Economic Research: Cambridge, MA.Google Scholar
  39. Gormley, TA . 2010: The impact of foreign bank entry in emerging markets: Evidence from India. Journal of Financial Intermediation 19 (1): 26–51.CrossRefGoogle Scholar
  40. Grubel, HG . 1977: A theory of multinational banking. Banca Nazionale del Lavoro Quarterly Review 123 (Dec.): 349–363.Google Scholar
  41. Havrylchyk, O and Jurzyk, E . 2011: Inherited or earned? Performance of foreign banks in Central and Eastern Europe. Journal of Banking & Finance 35 (5): 1291–1302.CrossRefGoogle Scholar
  42. Ivashina, V and Scharfstein, DS . 2010: Bank Lending During the Financial Crisis of 2008. Journal of Financial Economics 97: 319–338.CrossRefGoogle Scholar
  43. Iyer, R, Samuel, L, José-Luis, P and Antoinette, S . 2014: The Inter-Bank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007–2009 Crisis. Review of Financial Studies 27 (1): 347–372.CrossRefGoogle Scholar
  44. Kalemli-Ozcan, S, Papaioannou, E and Perri, F . 2013: Global banks and crisis transmission. Journal of International Economics 89 (2): 495–510.CrossRefGoogle Scholar
  45. Kamil, H and Rai, K . 2010: The global credit crunch and foreign banks’ lending to emerging markets: Why did Latin America fare better? IMF Working Paper No. 10/102, International Monetary Fund: Washington DC.Google Scholar
  46. Martinez Peria, S, Powell, A and Vladkova Hollar, I . 2002: Banking on foreigners: The behavior of international bank lending to Latin America, 1985–2000. World Bank Working Paper No. 2893, World Bank: Washington DC.Google Scholar
  47. Morgan, D, Rime, B and Strahan, PE . 2004: Bank integration and state business volatility. Quarterly Journal of Economics 119 (4): 1555–1585.CrossRefGoogle Scholar
  48. Morgan, D and Strahan, PE . 2004: Foreign bank entry and business volatility: Evidence from US states and other countries. In: Ahumada, LA and Fuentes, JR (eds). Banking Market Structure and Monetary Policy. Central Bank of Chile: Santiago, pp. 241–269.Google Scholar
  49. Ongena, S, Peydro Alcalde, JL and Van Horen, N . 2014: Shocks abroad, pain at home? Bank-firm level evidence on financial contagion during the 2007–2009 Crisis (mimeo).Google Scholar
  50. Peek, J and Rosengren, ES . 1997: The international transmission of financial shocks: The case of Japan. American Economic Review 87 (4): 495–505.Google Scholar
  51. Peek, J and Rosengren, ES . 2000a: Implications of the globalization of the banking sector: The Latin American experience. New England Economic Review (September/October): 45–63.Google Scholar
  52. Peek, J and Rosengren, ES . 2000b: Collateral damage: Effects of the Japanese bank crisis on the United States. American Economic Review 90 (1): 30–45.CrossRefGoogle Scholar
  53. Popov, A and Udell, G . 2012: Cross-border banking, credit access, and the financial crisis. Journal of International Economics 87 (1): 147–161.CrossRefGoogle Scholar
  54. Raddatz, C . 2010: When the Rivers Run Dry. Liquidity and the Use of Wholesale Funds in the Transmission of the U.S. Subprime Crisis. Policy Research Working Paper No. 5203, World Bank, Washington DC.Google Scholar
  55. Rocholl, J, Puri, M and Steffen, S . 2011: Global retail lending in the aftermath of the US financial crisis: Distinguishing between supply and demand effects. Journal of Financial Economics 100 (3): 556–578.CrossRefGoogle Scholar
  56. Schnabl, P . 2012: Financial globalization and the transmission of bank liquidity shocks: Evidence from an emerging market. Journal of Finance 67 (3): 897–932.CrossRefGoogle Scholar
  57. Van Rijckeghem, C and Weder, B . 2001: Sources of contagion: Is it finance or trade? Journal of International Economics 54 (2): 293–308.CrossRefGoogle Scholar
  58. Yorulmazer, T and Goldsmith-Pinkham, P . 2010: Liquidity, Bank Runs, and Bailouts: Spillover Effects During the Northern Rock Episode. Journal of Financial Services Research 37 (2): 83–98.Google Scholar

Copyright information

© Association for Comparative Economics 2014

Authors and Affiliations

  • Ralph De Haas
    • 1
  1. 1.EBRD, One Exchange SquareLondonUK

Personalised recommendations