Loans from my neighbors: East Asian commercial banks, banking integration, and bank default risk

Arbeitspapier

This study investigated the impact of banking integration on recipient country bank default risk and, in particular, whether the type of banking integration moderates that relationship. Using the system generalized method of moments (GMM), the study found that banking integration lowers bank default risk in recipient countries. The foreign claims that Asian lenders extend and the foreign claims that banks extend via local affiliates primarily drive the impact. These results show that the close proximity of lenders and borrowers or "local" knowledge via an affiliate's presence alleviates information asymmetry, allowing for effective monitoring and disciplining of the loan relationship. The result supports the fostering of banking integration, promoting deeper intra-regional connectedness throughout East Asia. Where foreign claims come from outside East Asia, policy makers should encourage their presence through local affiliates, as this has an equivalent impact.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ADBI Working Paper Series ; No. 1113

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Financial Aspects of Economic Integration
• Subject: banking integration ; international banking claims ; default risk ; information asymmetry ; East Asia

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nguyen, Dung Thuy Thi ; Diaz-Rainey, Ivan ; Roberts, Helen ; Le, Minh
• Event: Veröffentlichung
• (who): Asian Development Bank Institute (ADBI)
• (where): Tokyo
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/238470
• Last update: 10.03.2025, 11:45 AM CET