Foreign Banks and the Stability of Foreign and Domestic Credit in CEECs

The huge presence of foreign banks in CEECs leads to a strong dependence to banking foreign claims. They may be cross-border claims or claims of foreign subsidiaries located in the host country. Are foreign banks a factor that attracts foreign claims in the host country? Does their presence stabilize banking foreign flows and in fine the domestic credit supply? Using a Push&Pull framework, we adopt a macroeconomic point of view by using balance of payments data concerning banking foreign financing on all sectors in CEECs. Tests with panel data show that the presence of foreign banks is a substitute for banking foreign loans and is not a factor of their stability. Nevertheless, it has a stabilizing role on the domestic credit.