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Cross border banking: Pull-push effects of parent banks on subsidiaries' credit extensions

Author

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  • Gattini, Luca
  • Zagorisiou, Angeliki
Abstract
This study contributes to the analysis of cross border banking behavior in CESEE (Central Eastern and South Eastern Europe). It detects potential transmission channels from parent to subsidiary banks based on a newly constructed database (323 banks operating in the region and 84 parent banks over the period 2000-2014), which allows for the identification of ultimate ownership over time. On the whole, we find that subsidiary banks provide an extra boost to credit growth at the domestic level. However we detect that domestic and subsidiary banks contracted credit similarly after the financial crisis. Moreover, subsidiaries' ability to extend credit is dependent on home country macroeconomic and financial conditions as well as parent banks' characteristics such as asset quality. Finally, an excessive credit expansions coupled with reductions of capital ratios at the parent bank level jeopardizes subsidiaries' lending capacity. Our findings call for home and host actors to continue to foster cross-border coordination and dialogue.

Suggested Citation

  • Gattini, Luca & Zagorisiou, Angeliki, 2016. "Cross border banking: Pull-push effects of parent banks on subsidiaries' credit extensions," EIB Working Papers 2016/07, European Investment Bank (EIB).
    • Handle: RePEc:zbw:eibwps:201607
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cross border banking; Parent and subsidiary banks; Central and Eastern Europe; Asset quality;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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