State-owned banks and international shock transmission

Abstract

This study re-examines the relationship between commercial bank ownership and lending growth from 1996–2019. The results show that before the 2008 financial crisis, both categories of foreign banks expanded lending, predominantly in developing countries. A shift occurred in the lending behavior of foreign banks post-2008. Bank-specific characteristics became more influential in determining credit growth. During host country banking crises, foreign state-controlled banks demonstrated higher loan growth rates than private-owned banks and reduced credit growth abroad during banking crises in home countries. Lastly, during the 2008 crisis, domestic state-controlled banks stabilized lending activity, while both types of foreign banks reduced lending.