نقش بانک های خارجی در انتقال سیاست پولی: شواهدی از آسیا در طول بحران 2008-9

Since the 1997–8 Asian financial crisis, the level of foreign bank penetration has increased steadily in Asian banking markets. This paper examines the impact of foreign banks on the monetary policy transmission mechanism in emerging Asian economies during the period from 2000 to 2009, with a specific focus on the global financial crisis of 2008–9. We present consistent evidence that, on the whole, an increase in foreign bank penetration weakened the effectiveness of the monetary policy transmission mechanism in the host emerging Asian economies during crisis periods. We also investigate various conditions and environments, including the severity of shocks upon parent banks in the global crisis, the dependence of parent banks on the wholesale funding market, the country of origin of foreign banks, and entry modes, under which the effectiveness of monetary policy transmission is reduced more severely due to the increasing presence of foreign banks in the emerging Asian banking markets

Since the 1997–8 Asian financial crisis, the banking system and domestic financial sectors in Asia have experienced significant structural changes and global integration. Domestic banks in Asia have become more consolidated, while facing more intensive competitive pressure from domestic and abroad. Through the efforts of opening up and international financial integration, with the policy recommendation from the International Monetary Fund, the presence of foreign banks has steadily increased. Between 1994 and 2009, emerging Asian banking markets have seen an increase in the level of foreign bank penetration from 17% to 25% when measured by the share of bank assets held by foreign banks, and from 26% to 43% when measured by the ratio of the number of foreign banks to the total number of banks in the host country.1 The recent global financial crisis of 2008–9 provides the first significant test for evaluating the stabilizing/destabilizing role of foreign banks in emerging Asia after experiencing a steady and substantial increase in foreign ownership in their banking sectors (Vogel and Winkler, 2011). Foreign banks are expected to enhance the financial stability of the host banking sector by providing an additional source of financing for lending. However, during the recent global financial crisis, it has been observed that many local subsidiaries of foreign banks in Asia reduced their credit by a larger extent than their domestic counterparts. The average growth rate of loans from foreign bank subsidiaries fell from 18.6% in 2007 to − 4.0% in 2009, while domestic banks only from 15.4% to 5.1% (see Fig. 1).2 Meanwhile, foreign banks' cross-border lending to Asian economies also decreased substantially during the 2008–9 crisis period (Fig. 2). Since the collapse of Lehman Brothers in September 2008, foreign banks' cross-border claims to Asian economies were reduced by 127 billion dollars in six months, among which the shrinkage of the funds to Asian banks amounted to 69 billion.3This paper examines the impact of increased foreign bank penetration on the monetary policy transmission mechanism in emerging Asian economies during the period from 2000 to 2009, with a specific focus on the recent global financial crisis. We specifically focus on the bank lending channel as the monetary policy transmission mechanism in seven Asian economies, namely, Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore, and Thailand.4 Estimating the loan growth equation and loan interest rate equation using the bank-level panel data, both of which control for bank-specific characteristics and demand factors, allows us to identify the different effects of changes in host country monetary policy on lending by domestic banks and foreign banks operating in host countries through the supply-side bank lending channel. In our study, we adopt different types of bank ownership—domestically owned vs. foreign owned—as an important factor of bank-specific characteristics affecting the capacity of financing for loans, along with other bank-specific characteristics, including liquidity, capitalization, bank size, profitability, and levels of riskiness. Using the Asian data in the banking sector provides unique opportunities for us to investigate the role of foreign banks in monetary policy transmission in an environment where, first, the presence of foreign banks has increased steadily since the 1997 Asian financial crisis; second, global foreign banks and regional foreign banks coexist in the region; and third, banks play an important role in transmitting monetary policy to the host economies and facilitating project financing and economic growth. In contrast to emerging Asia, the banking sector in Eastern Europe is too dominated by foreign banks over the weak presence of domestic banks, and foreign banks in Latin America have not been affected significantly, compared to other regions, by the recent global financial crisis.5 The main contributions of this paper are, first, to present consistent evidence on the buffering impact of foreign banks on the effectiveness of the monetary policy transmission mechanism from the bank-lending channel perspective in emerging Asian economies during the period of global financial crisis, and second, to identify specific conditions and environments under which that impact works more fully in the host banking markets. The specific conditions and environments include the severity of shocks upon parent banks during global financial crisis, the dependence of parent banks on wholesale funding markets, the country of origin of foreign banks, and their entry modes to host banking markets. The main findings are robust to various alternative samples, measurements, and conditions. We also expect that the main findings of this paper will have useful policy implications for monetary authorities and bank regulators to minimize the adverse effects of the increasing presence of foreign banks on the stability and effectiveness of monetary policy in the Asian region. The remainder of this paper is organized as follows. Section 2 reviews the related literature on the role of foreign banks in emerging economies. Section 3 describes the model, data and methodology used in the study. Section 4 reports and discusses the empirical results, followed by robustness checks in Section 5. Section 6 concludes.

Although the level of penetration of foreign banks into the domestic banking sectors is observed to be on a steadily ascending trend in Asia, particularly in the wake of the 1997–98 Asian financial crisis, there has not been much research that explores the impact of the foreign bank presence on the bank lending channel as a monetary policy transmission mechanism in the Asian emerging economies. This paper presents consistent evidence that there exist heterogeneous responses on loan growth and loan interest rates between domestic banks and foreign-owned banks in response to changes in monetary policy in the host emerging Asian economies during the recent global financial crisis of 2008–9. We find that, first, foreign banks overall do not show distinctive behavior from domestic banks in adjusting loan growth and loan interest rates in host Asian banking markets during non-crisis, tranquil periods, and second, during crisis periods, however, foreign banks play a buffering or even hampering role in affecting the monetary policy transmission mechanism by adjusting loan growth and loan interest rates in a way opposite to domestic banks. The empirical results are robust to various alternative measures, different econometric methodologies, different sample countries and periods, incorporating demand factors in the estimations, and considering changes in monetary policy in home countries. This finding is consistent with the proposition that, when global banks encounter liquidity shocks in their home countries, they conduct a global reallocation of liquidity from foreign subsidiaries in host countries to the parent banks in home countries using internal capital markets (Cetorelli and Goldberg (2011), Jeon et al. (2013)) As a result, global banks cause a dampening effect on the potency of monetary policy conducted by monetary authorities in the host countries of their subsidiaries overseas. In addition, we present empirical evidence that the buffering effects of foreign banks in the Asian banking markets on the efficiency of monetary policy transmission during crisis periods become more conspicuous, (1) for foreign banks whose parent banks in home countries are more adversely affected; (2) for foreign banks whose parent banks are more dependent on non-deposits, wholesale markets funding; (3) for global foreign banks more than Asia-regional foreign banks; and (4) for foreign banks which entered the host banking markets via a greenfield entry mode rather than an M&A entry mode. Our findings suggest an important policy implication for both policy makers and banking regulators that, when monetary authorities in host countries conduct monetary policies—expansionary or contractionary—during crisis periods to bail them out from the credit crunch and spillover effects of financial shocks from abroad, they must take into account the buffering or hampering effects of foreign banks on the effectiveness of the monetary policy transmission mechanism in the host countries. The magnitude of the offsetting effects by foreign banks varies according to different factors originated from various bank-specific, host banking-market specific, and policy-specific conditions, as identified in this paper. This challenge facing monetary authorities in emerging Asian economies is expected to remain significant and become even larger as the level of foreign bank penetration in the Asian banking markets continues rising in the near future.