Entry of Foreign Banks and their Impact on Host Countries

Lehner, Maria and Schnitzer, Monika (June 2006): Entry of Foreign Banks and their Impact on Host Countries. SFB/TR 15 Discussion Paper No. 152

Abstract

Foreign bank entry is frequently associated with spillover effects for local banks and increasing competition in the local banking market. We study the impact of these effects on host countries. In particular, we ask how these effects interact and how they depend on the competitive environment of the host banking market. An increasing number of banks is more likely to have positive welfare effects the more competitive the market environment, whereas spillovers are less likely to have positive welfare effects the stronger competition. Hence, competitive effects seem to reinforce each other, while spillovers and competition tend to weaken each other.

• Item Type: Paper (Discussion Paper)
• Keywords: foreign bank entry, multinational bank, competition in banking, spillover effects
• Collections: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B5 - Weltwirtschaftliche Integration und die neue Firmenorganisation
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: F37, G21, L13, O16
• Language: English