Abstract
Foreign banks have increased their market share in many emerging markets since the mid-1990s. We analyse the stability implications of foreign banks for cross-border and domestic bank lending in the global financial crisis. Our results suggest that a higher foreign bank presence was associated with more stable cross-border bank flows. This result is largely driven by two regions: Eastern Europe and Sub-Saharan Africa. However, we fail to find similar evidence for domestic bank lending. This indicates that the financial stability benefits of a stronger foreign bank presence in emerging markets did not spill over from cross-border flows to domestic lending.
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