While efficiency of the host country’s banking market can be improved through the entry of foreign banks, cross-border activities can transmit shocks.This reveals the necessity of supranational regulation and supervision.
The author finds that, despite a recovery of overall business lending by U. banks after the financial crisis, small business lending remained depressed, particularly among large banks and banks in worse financial condition.
This paper finds that acquisitions of community banks by non-local acquiring banks (without a local presence) lead to declines in local small business lending.
They document that both small and large banks have distinct advantages in lending to small businesses, with small banks more likely to emphasize relationship lending technologies and large banks more likely to use transactional ones.
However, they also find that small business lending for all-sized banks is in general characterized by practices that are locally-based, relationship-oriented, and high-touch (meaning, staff-intensive).
Banks’ decision to internationalize can be determined by entry barriers, geographical distance or growth prospects.
The entry of foreign banks into domestic markets can bring along benefits and costs for the host country.This paper examines the impact of remote lenders on the supply of small business loans guaranteed by the Small Business Administration.Results suggest that the entry of a large remote lender into specific industries generates significant growth in lending with little evidence of a reduction in loans by incumbent SBA lenders.The authors show that big banks are expanding primarily within urban areas.While small banks are doing relatively worse in these areas, big bank expansion is actually helping small banks by removing a competitor from their market.Cross-border linkages of banks can transmit liquidity shocks from one country to another.This has become obvious during the recent financial crisis, where internationally active banks played an important role in the transmission of shocks.These results are inconsistent with the notion that rural banks are threatened by “talent migration” and therefore are unable to replace CEOs with the same effectiveness as urban banks.The authors present a “top-down” stress testing model specifically developed for community banks.A liquidity shock can be transferred from one country abroad to the domestic country due to various channels…[more] Internationally active banks can be a source of systemic risk as a default of one bank can easily spill over to banks in other countries.