The rise of Asian-owned foreign banks and credit stability in Asia

Ying Xu

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    This chapter focuses on foreign banks' local lending and its implication for credit stability in Asia. Employing a large and the most recent banking data set for 10 major Asian economies for 2000-09, this study provides fresh evidence that the country of origin of foreign banks explains variations in lending behavior. Asian-owned foreign banks showed the mildest change in credit growth during the recent Global Financial Crisis (GFC), contributing to credit stabilization in Asia in times of stress, whereas non-Asian foreign banks - particularly those from North America and Europe - cut off credit sharply from the Asian periphery, undermining credit stability in the region. Preliminary evidence suggests that the breakdown in the wholesale funding market in the GFC put pressure on non-Asian foreign banks, thus transmitting credit turbulence to Asia. The study calls for policies supporting regional financial integration with Asian-owned foreign banks, which help to build a robust and stable Asian banking system.
    Original languageEnglish
    Title of host publicationRebalancing Economies in Financially Integrating East Asia
    Editors Jenny Corbett and Ying Xu
    Place of PublicationAbingdon and New York
    PublisherRoutledge Taylor & Francis Group
    Pages240-257
    Edition1st
    ISBN (Print)9780415859363
    Publication statusPublished - 2015

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