1、 外文翻译 Foreign Bank Participation in Developing Countries: What Do We Know about the Drivers and Consequences of This Phenomenon? Material Source:The World Bank Report August 2010 Author: Abstract Foreign bank participation has increased steadily across developing countries since the mid-1990s. This
2、paper documents this trend and surveys the existing literature to explore the drivers and consequences of this phenomenon, paying particular attention to the differences observed across regions both in the degree of foreign bank participation and in the impact of this process. Local profit opportuni
3、ties, the absence of barriers to entry, and the presence of mechanisms to mitigate information problems have been the main factors driving foreign bank entry across developing countries. In general, foreign bank participation has been shown to exert a positive influence on banking sector efficiency
4、and competition. The weight of the evidence suggests that foreign bank presence does not endanger, but rather enhances banking sector stability. And although some case studies suggest that foreign bank entry limits access to finance, many cross-country studies offer evidence to the contrary. 1 Intro
5、duction The process of financial globalization, which accelerated in the 1990s, has brought many changes to developing countries financial sectors. Countries have opened up their stock markets to foreign investors, allowed domestic firms to cross-list and issue debt overseas, and welcomed foreign di
6、rect investment into their local financial sectors. When it comes to the banking sector, arguably no change has been as transformative as the increase in foreign bank participation in developing countries. On average, across developing countries, the share of bank assets held by foreign banks has ri
7、sen from 22 percent in 1996 to 39 percent in 2005.1 At the same time, foreign bank claims on developing countries, which together with the loans extended by foreign bank branches and subsidiaries include cross-border loans, increased from 10 percent of GDP in 1996 to 26 percent in 2008. There is sig
8、nificant debate surrounding the implications of foreign bank participation for developing countries. Supporters of this process argue that foreign banks can bring much needed capital as well as technical skills, and product innovation to developing countries. Also, they highlight the potential gains
9、 in terms of increased competition and improvements in the efficiency of the banking sector. On the other hand, the critics of foreign bank entry argue that foreign banks can destabilize the local banking sector due to a number of reasons. First, foreign banks can “import” shocks from their home cou
10、ntries and/or spread shocks from other developing countries in which they operate. Second, fierce competition with foreign banks can threaten the survival of the local banks. Finally, foreign banks can lead to reduced access to finance for a majority of domestic firms and consumers, if they only con
11、centrate on a top and selected segment of the market. This paper documents the increase in foreign bank participation in developing countries and, through an exhaustive literature review, explores the drivers and consequences of this phenomenon, paying particular attention to the differences observe
12、d across regions both in the degree of foreign bank participation and in the impact of this process. The increase in foreign bank participation has not been even. While the share of assets held by foreign banks has increased steadily and achieved significant levels in Eastern Europe (52 percent), La
13、tin America (34 percent), and Sub-Saharan Africa (50 percent), foreign bank participation has remained constant at very low levels in South Asia (7.5 percent). In East Asia and the Middle East, foreign bank entry has increased since the mid-1990s, but it still represents less than 20 percent of the
14、system. In terms of the drivers of foreign bank entry, the available empirical literature suggests that local profit opportunities, the absence of barriers to entry, and the presence of mechanisms to mitigate information problems have been the main factors driving the process of foreign bank entry i
15、n developing countries. Regarding the implications of foreign bank participation, with few exceptions, the overwhelming evidence from cross-country research and from a significant number of case studies focused on Eastern Europe and Latin America suggests that foreign banks are more efficient than d
16、omestic banks and, consequently, can exert competitive pressure. On the other hand, the evidence for Asia, a region that has been a latecomer to the process of foreign bank entry and where many barriers still exist, is more mixed. Research on the impact of foreign bank participation on banking stabi
17、lity suggests that for the most part foreign banks have played a stabilizing role in developing countries. As for the effects of foreign bank participation on access to finance, the evidence is mixed with many cross-country studies suggesting that foreign banks enhance access, but some case studies
18、providing evidence to the contrary. 2 The Drivers of Foreign Bank Entry What is behind the rise in foreign bank participation in developing countries? The literature on the drivers of foreign bank participation has focused on four main sets of factors, namely: the desire of banks to follow their hom
19、e customers abroad, the attractiveness of local profit opportunities in the host countries, the absence or elimination of barriers to foreign bank entry, and the presence of mechanisms to mitigate information costs of doing business in foreign markets. Below, we review and discuss the evidence on ea
20、ch of these factors. Following home country customers Early studies on foreign bank entry have argued that an important motivation for banks to enter new markets is the desire to follow their customers overseas. In other words, they open operations outside of the home country to meet the needs of th
21、eir clients with international operations. As evidence for this motivation, many of the early studies found a significant relationship between the level of foreign direct investment in the United States and the level of participation by banks from the country of origin in the U.S. banking market (Go
22、ldberg and Saunders, 1981a; Hultman and McGee, 1989; Goldberg and Grosse, 1994). Subsequent studies found strong links between the participation of German banks in other countries and the level of German non-financial FDI in those countries (Buch, 2000; Wezel, 2004). Other studies have linked foreig
23、n bank participation to measures of bilateral trade (Goldberg and Saunders, 1980, Focarelli and Pozzolo, 2000) or general measures of trade openness such as the ratio of imports to GDP (Goldberg and Saunders, 1981b, Focarelli and Pozzolo, 2001). A number of studies find significant relationships for
24、 both FDI and trade measures within the same econometric model of foreign bank participation (Goldberg and Johnson, 1990; Brealey and Kaplanis, 1996; Fisher and Molyneux, 1996). Pursuing opportunities in the host country Along with the desire to serve home clients, studies have emphasized the import
25、ance of economic opportunities in the host countries as a motivation for foreign bank entry. In this regard, there is ample evidence that foreign banks are drawn to larger, more vibrant economies, with greater profit opportunities. Early studies for the US and Japan demonstrated that foreign bank pa
26、rticipation was linked to measures of real GNP and GNP per capita (Goldberg and Johnson, 1990; Yamori, 1998) and to more specific measures of banking sector activity such as the size and growth rate of the banking sector and the rate of domestic investment (Goldberg and Saunders, 1980; Goldberg and
27、Saunders, 1981b; Goldberg and Johnson, 1990; Yamori, 1998). Cross-country studies have also shown that foreign bank participation is positively related to the host countrys GNP (Claessens et al., 2000) and financial depth (Focarelli and Pozzolo, 2000). Similarly, research on German banks indicates t
28、hat these banks are drawn to markets with high levels of GDP and GDP per capita (Buch, 2000; Buch and Lipponer, 2004), while foreign bank participation in Hong Kong and Korea is linked to growth in the local banking sector (Leung, Young, and Fung, 2008; Lee, 2003). Restrictions on foreign participat
29、ion and the role of crisis Another obvious factor that has been shown to affect the level of participation by foreign banks is the existence of restrictions on foreign bank entry and on the activities that banks can pursue, as well as the burdens imposed by regulations and supervision in the host co
30、untry. Early studies pointed to the importance of specific pieces of legislation in spurring foreign bank participation such as the 1978 Banking Act in the United States and the Japanese Banking Act of 1982 (Goldberg and Saunders, 1981a; Hultman and McGee, 1989). Subsequent studies demonstrated that
31、 foreign bank participation is greater in markets where they face fewer regulatory restrictions on their activities (Goldberg and Grosse, 1994; Focarelli and Pozzolo, 2000; Buch, 2003; Buch and De Long, 2004; Buch and Lipponer, 2004; Galindo et al, 2003; Bertus, Jahera, and Yost, 2008) and lower tax
32、es (Claessens et al., 2000). Mechanisms that help mitigate information costs Another strand of the literature on the determinants of foreign bank participation examines the costliness of acquiring information on borrowers in a destination market. Data from the top 100 multinational banks link greate
33、r foreign bank participation to the existence and quality of the credit reporting agency in the host country (Tsai et al, 2009). Another means of coping with informational asymmetry between lender and borrower is through ex-post enforcement in cases of default. Studies have shown that foreign bank p
34、articipation levels are higher where there is less corruption and greater adherence to the rule of law (Galindo et al., 2003) and greater judicial efficiency (Focarelli and Pozzolo, 2000). A final strand of the literature on how information costs affect the level of foreign bank participation emphas
35、izes the roles of cultural similarity and geographic proximity. Cross-country evidence indicates that proximity between home and host country and a common language are associated with higher levels of foreign bank participation and greater likelihood of acquisition by a foreign bank (Buch, 2003; Buc
36、h and De Long, 2004). A common legal framework between home and host also coincides with higher levels of foreign bank participation (Galindo et al., 2003; Buch, 2003; Buch and De Long, 2004). A more recent study emphasizes that it is not the absolute physical or cultural distance between home and h
37、ost but rather a relative comparison with distances for other foreign competitors in the host market that affects location decisions (Claessens and Van Horen, 2008b). 3 The Consequences of Foreign Bank Entry What is the impact of foreign bank participation in developing economies? Studies on the con
38、sequences of foreign bank entry have predominantly focused on three main areas: the implications of foreign bank entry on the efficiency and degree of competition in the banking sector, the impact on banking sector stability, and the effects on access to finance, in particular for opaque borrowers s
39、uch as small businesses. In what follows, we review the evidence on each of these topics, highlighting wherever appropriate the differences observed across regions. Foreign bank presence, efficiency,and competition A series of cross-country empirical studies show that the presence of foreign-owned b
40、anks is associated with greater efficiency and competition in a host countrys banking sector. In particular, foreign bank presence has been linked to lower net interest margins, profitability, cost ratios, and non-interest income for domestic banks in developing countries (Claessens et al., 2000, 20
41、01; Claessens and Lee, 2003; Bayraktar and Wong, 2004). Also, foreign bank presence and fewer restrictions on banks activities have been directly linked to greater competiveness in a host countrys banking sector as reflected in the Panzar-Rosse H statistic (Claessens and Laeven, 2003, Gelos and Rold
42、os, 2004). Other cross-country studies that compare the relative performance of foreign and domestic banks, find that foreign banks have relatively higher interest margins and profitability and lower overhead costs in developing host countries (Demirguc-Kunt and Huizinga, 2000; Micco, Panizza, and Y
43、anez, 2007). Those authors, therefore, conclude that foreign banks in developing countries are relatively strong competitors in under-developed banking markets and can exert pressure on domestic banks to become more efficient and competitive. Foreign bank penetration and banking sector stability Evi
44、dence on the effects of foreign bank presence on banking sector stability is more clear-cut than that regarding efficiency and competition. Early cross-country evidence from developed and developing countries indicates that greater foreign bank presence is associated with lower probability of system
45、ic banking crisis in the host country (Demirguc-Kunt et al., 1998). Subsequent research on a broader sample of 107 countries shows that official barriers to foreign bank entry are associated with measures of banking system fragility (Barth et al., 2004). Foreign bank entry and access to credit A lon
46、g-standing concern is that foreign banks skim off the top customers of domestic banks, thus undermining their financial health. In principle, this competition could be so destabilizing that some domestic banks would go out of business and the overall level of credit in the host country might decline
47、. Indeed, one theoretical model demonstrates that when domestic banks are better at relationship lending, meaning they rely on soft information in assessing a borrowers creditworthiness, the entry of foreign banks that are able to compete away clients that can secure loans based on hard information
48、(e.g., balance sheets) could leave soft-information clients worse off and reduce welfare (Detragiache, Tressel, and Gupta, 2008). Ultimately, however, whether this theoretical possibility is valid is an empirical question. Some cross-country level evidence suggests that foreign bank presence is asso
49、ciated with less provision of credit. For example, foreign bank presence is negatively associated with the average level of credit to the private sector (relative to GDP) and the growth rate in credit for 89 low income countries over the period 1999 to 2002 (Detragiache, Tressel, and Gupta, 2008). In effect, this is cross-sectional analysis because private credit levels and growth rates are averaged over the period of study. Some of our own research that looks more closely at the timing of foreign entry suggests that those associations might not be causal but rather are driven b
