Cross-Border Bank Lending Empirical Evidence on Further Determinants from OECD Banking Markets

Employing data on bank claims from 13 OECD countries vis-à-vis 51 emerging markets between 1993 and 2007 this study provides empirical evidence that monopolistic banks from OECD countries tend to ration credit to emerging markets whereas increasing competitive pressure may spur cross-border bank lending. Furthermore, empirical results indicate that banks may arbitrage on costs arising from different regulatory requirements and may be more prone to higher risk-taking under a greater generosity of the local deposit insurance system. Finally, while higher capital buffers may act as an impediment to cross-border lending, pursuing a "gambling for resurrection" strategy tends to have a positive impact on the volume of OECD bank claims towards emerging markets. Further sensitivity analyses from splitting the entire data into subsamples of more-developed emerging markets and frontier markets as well as lending transactions during and beyond a common lender relationship reveal further important insights concerning the explanatory power of the determinants employed