Transcript Document

Powerful parents? The dark and the
bright side of multinational banking
Ralph De Haas
EBRD
Banca d’Italia, June 10th 2013
LENDING BY MULTINATIONAL BANKS AND IMPLICATIONS
STABILITY AND INTEGRATION
FOR FINANCIAL
European banking integration: view from above
Source: Bankscope, bank websites
European banking integration: view from the ground
Red dots – only domestic banks
Blue dots – only foreign banks
Green dots – domestic and foreign banks
Source: Beck, Degryse, De Haas and Van Horen (2013)
Czech Republic: foreign banks rule
Source: Beck, Degryse, De Haas and Van Horen (2013)
Poland: a more mixed picture
Source: Beck, Degryse, De Haas and Van Horen (2013)
The bright side of multinational banking
1.
Positive impact on banking efficiency (Fries and Taci 2005)
2.
In the medium term, positive impact on access to finance
(Giannetti and Ongena 2012)
3.
More stable than cross-border credit (Peek and Rosengren 2000)
4.
Parental support via internal capital markets (Cetorelli and
Goldberg 2012) stabilizes economies during local banking crises
(De Haas and Van Lelyveld 2006/2010)
The dark side of multinational banking
1.
Exacerbates local business and credit cycles (Morgan et al. 2004)
•
Boom in Emerging Europe: 2004-2007 (De Haas, Korniyenko,
Loukoianova, and Pivovarsky 2012)
•
2.
Regional U.S. housing booms (Loutskina and Strahan 2011)
Transmits financial shocks across borders
•
From Japan to the U.S. (Peek and Rosengren 1997/2000)
•
From Western to Emerging Europe (Popov and Udell 2010;
Ongena, Peydro, Van Horen 2013)
•
Globally: during 2008/09, MNB subs deleveraged faster
than domestic banks, in particular wholesale-funded
subsidiaries and subsidiaries of wholesale-funded parents
(De Haas and Van Lelyveld 2013)
Some things we learned
1. Multinational banking: double-edged sword
•
Why? ICMs are two-way streets
•
Substitution and support effects
2. Composition debt funding matters
•
‘Sticky’ (insured) retail vs. ‘flighty’ wholesale (Kamil and Rai 2011)
•
FX vs. LC wholesale funding: swap markets can break down (Ivashina,
Scharfstein, and Stein 2013)
Variation across multinational banks?
• Large literature on differences between domestic and foreign
banks (Claessens and Van Horen 2013)
• We know less about differences between and within multinational
banks in terms of funding and business models
• Banking Environment and Performance Survey (BEPS II)
1. Detailed face-to-face surveys with >600 bank CEOs across 32 EBRD
countries of operation
2. Quantitative follow-up surveys filled out by >300 of these banks
3. Collection of detailed information on the geographical location of
137,575 bank branches owned by 1,840 banks
ICMs as two-way streets
Fund flows between Italian parents and their subsidiaries
during the years 2007-2012
0
0
.2
.2
.4
.4
.6
.6
.8
.8
1
1
Fund flows between parents and subsidiaries
during the years 2007-2012 by region
CEB
Credit/Liquidity to subsidiary
Dividend to parent
SEE
Credit/Liquidity to parent
CEB
Credit/Liquidity to subsidiary
Dividend to parent
SEE
Credit/Liquidity to parent
Source: De Haas and Kirschenmann, 2013
Powerful parents: credit-growth drivers
Does your parent set annual targets
for you in terms of credit growth?
CEB
SEE
7%
28%
73%
93%
No
Yes
Graphs by region
Source: De Haas and Kirschenmann, 2013
Push for market share
Does your parent set annual targets
for you in terms of market share?
CEB
SEE
33%
49%
51%
68%
No
Yes
Graphs by region
Source: De Haas and Kirschenmann, 2013
Use of centralised Treasuries
Source: De Haas and Kirschenmann, 2013
0
500
1000
1500
Business models matter...
2001
2005
2003
2009
2007
2011
Centralized treasury
No centralized treasury
Local banks
Source: De Haas and Kirschenmann, 2013
Open questions
What explains variation between and within MNBs?
1. Business models (“the Spanish model”) vs. host-country conditions
(Latin America vs. Emerging Europe)?
2. Role “traditional” ICM (liquidity and dividend flows) vs. economic
capital allocation and credit growth/market share target-setting
3. Centralised vs. decentralised risk management
4. Homogeneous branches vs. heterogeneous subsidiaries
A better understanding of this variation is particularly important for
(tailor-made) supervision rather than (broad-brushed) regulation
Thank you