Banking across Borders with Heterogeneous Banks

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIndividual banks differ substantially in their foreign operations. This paper introduces heterogeneous banks into a general equilibrium framework of banking across borders to explain the documented variation. While the model matches existing micro and macro evidence, novel and unexplored predictions of the theory are also strongly supported by the data: The efficiency of the least efficient bank active in a host country increases the greater the impediments to banking across borders and the efficiency of the banking sector in the host country. There is also evidence of a tradeoff between proximity and fixed costs in banking. Banks hold more assets and liabilities in foreign affiliates relative to cross-border positions if the target country is further away and the cost of foreign direct investment is low. These results suggest that fixed costs play a crucial role in the foreign activities of banks.

Cross-border banking and foreign branch regulation in Europe

“…In Notes: %FD it = percentage of not EEA banks' deposits on the overall market computed on the basis of the Formula (1); %FL it = percentage of not EEA banks' loans on the overall market computed on the basis of the Formula (2); HHI it = Herfindahl-Hirsman concentration index on the basis of the total assets of banks classified by Country computed on the basis of the Formula (3) Source: Orbis data processed by the authors Cross-border banking accordance with Buch et al (2011), international banks interested in going abroad are big enough to support fixed costs and, moreover, their efficiency is determined by their focus on off-balance-sheet operations yielding high net interest income (Generale and Gobbi, 1999). This is consistent with reductions in domestic banks in the host market upon arrival of foreign competitors (Claessens et al, 2001); moreover, contrary to Focarelli and Pozzolo (2001), who analyze a different time period, banks going abroad want to increase their return on assets; this can be pursued by attempting to enter more efficient banking systems (Niepmann, 2018), while country ROA is not significant. Notes: The table presents results of a probit regression model with fixed effects (a) and a GLM regression model (b) that is considering as dependent variable a dummy that assume value 1 if the banking group has a foreign branch in the country j at time t and zero otherwise.…”

“…A more detailed analysis of the role of regulatory restrictions on the foreign bank entry decision is performed by studying only banking groups that have at least one foreign branch in an EEA country; from a welfare point of view, the branch operating mode dominates because it economizes on private funds (Calzolari and Loranth, 2011). First, our analysis evaluates the impact of the characteristics of the international bank along with the host country features (Niepmann, 2018) on the choice to enter (e.g. Focarelli and Pozzolo, 2001) (4a).…”

Credit Dynamics and Financial Globalisation

“…In relation to multi-country banking groups, a substantial proportion of cross-border positions are maintained vis-à-vis other branches and affiliates within the same banking organisation (see also McCauley et al , 2010). The drivers of intra-group cross-border flows are studied by Cetorelli and Goldberg (2011, 2012), Ivashina et al (2012), Bruno and Shin (2013) and Niepmann (2013).…”

Dimer Organization of Membrane‐Associated NS5A of Hepatitis C Virus as Determined by Highly Sensitive 1H‐Detected Solid‐State NMR

“…Hepatitis Cv irus (HCV) infection is am ajor cause of chronic hepatitis,w ith approximately 70 million infected individuals worldwide,w hich frequently further develops into liver cirrhosis and hepatocellular carcinoma. [1] HCV is an enveloped virus of the Flaviviridae family with as inglestranded RNAgenome.The open reading frame is translated into as ingle polyprotein which is further processed into ten individual membrane-bound proteins (reviewed in [2][3][4]).…”