Multinational Banks in Times of the Financial Crisis: Consequences for Emerging Europe and Cross-Border Regulation

Jan Kaufhold

Student thesis: Master thesis

Abstract

During the last two decades, western multinational banking groups have significantly ex-panded to Eastern Europe and, by now, dominate the local banking sector. Due to the high dependency of the respective economies on these cross-border banks, this thesis examines how the turbulent events of the financial crisis have affected the activities of foreign sub-sidiaries and branches in the emerging countries. On the basis of data from the European Central Bank and Eurostat, the corresponding analysis focuses on the 27 member states1 of the European Union and covers the time peri-od from 2007 until 2012. In order to evaluate the development of multinational banks’ op-erations, the following indicators have been used: (1) the number of foreign and domestic banks in the individual member states, (2) the amount of their total assets, and (3) the val-ues of their total loans as well as total deposits. According to the key findings of the empirical analysis, western multinational banks have maintained their operations at a constant level in the eastern European countries within the sample timeframe. Even though their foreign affiliates have not been equipped with addi-tional liquidity during the years of the global crisis, a deliberate withdrawal of capital from the eastern periphery to the western parent banks could not be observed, either. However, certain observations of the empirical analysis confirm previous scientific studies, which have discovered the existence of internal capital markets between the different parts of cross-border banking groups. Based on the existence of internal capital markets and on the high market share of multina-tional banks in the new member states, this thesis recommends a more integrated frame-work within the European Union concerning the regulation and supervision of cross-border banking groups. Nevertheless, when designing and establishing new reforms, regulators and policy makers should strive for the appropriate balance between costs, which emerge for the market participants, and efficiency gains of these measures.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2013
Number of pages93