Bank Ownership and Lending Behaviour

This study contributes to the academic literature by analysing the impact of bank ownership on bank lending behaviour in developed and emerging market economies. It empirically investigates this issue in the following three areas. First, it explores the lending behaviour of banks with different ownership types during normal and financial crisis periods, using bank-level data from 64 countries for the period of 2004-2013. The sampled banks are classified into foreign-owned, domestic-private and government-owned banks. It uses different loan series’ to investigate how banks behaved in loaning to the corporate/commercial and consumer/retail sectors. The findings indicate that bank loan supply across loan series and sample groups significantly declined during the recent global financial crisis period. There are significant differences in loan reductions in different business sectors and in different countries. The results also show that loan growth rates significantly decline in the consumer and retail sectors. The loan reduction was higher in foreign-owned banks, in comparison to the loan reductions in domestic-private banks. This difference is more exacerbated in emerging countries. Overall, our results suggest that the lending behaviour of banks with different types of ownership vary according to whether they are in emerging versus developed economies. Second, this study analyses the impact of credit information sharing and creditor rights protection on lending behaviour of banks with different ownership types during normal and crisis periods. In addition to the depth of information sharing index, this study uses the coverage ratio of public and private credit institutions. The lending response to changes in creditor rights protection and court efficiency is also tested with a particular interest in the recent global financial crisis. This study examines how banks with different ownership types respond to the strength of creditor rights protection and improved information sharing facilities. The results show that improved information sharing environment and efficient contract enforcement facilitates bank lending in not only during normal times, but also during crisis periods. Furthermore, this study also finds that domestic bank lending is more sensitive to the strength of the information sharing facilities, whereas foreign-owned banks’ lending rate is more responsive to the strength of court enforcement. Third, this study examines the role of banks with different ownership types in implementing the efficient transmission mechanisms of monetary policy during normal and crisis periods. It examines how banks with different ownership types respond to monetary policy changes. It also considers various types of asset purchase programmes during the recent global financial crisis period and tests the role of domestic and foreign banks in the transmission process of unconventional monetary policy. The study finds a negative and significant relationship between bank lending rates and changes in the monetary policy interest rates. The findings confirm the existence of a bank lending channel during the 2004-2013 period. Furthermore, the results indicate that banks with different ownership types respond differently to the changes in monetary policy. Specifically, the findings confirm that foreign bank lending response to the conventional and unconventional monetary policy was less responsive compared to domestic banks. This indicates that foreign banks dampened the efficiency of monetary policy in host countries.

Grantor dc:publisher

Oxford Brookes University

Year dc:date

2020

Author dc:creator

• Haldarov, Zamon

Statement dc:rights

• All rights reserved

Language dc:language

en

DOI dc:identifier

https://doi.org/10.24384/3dcg-yy12

OAI identifier oai:identifier

tle:39e2a1a1-c771-42dc-95bf-7754b9eee036:d6bd9758-527a-46cd-bfe2-c433766e8fca:1