Description:
In this study, we employ a new dataset on bank ownership and reassess the links between domestic and foreign ownership and lending during the 1996 - 2018 period. Additionally, we distinguish between privately-owned and state-controlled banks and find that the lending activities of foreign state-controlled and privately-owned banks differ, particularly following the financial crisis of 2008. Our analysis confirms that foreign state-controlled and privately-owned banks provided credit during domestic banking crises in host countries, whereas lending by domestic state-controlled banks contracted. Further, foreign state-controlled banks reduced their credit base during a home banking crisis, whereas foreign privately-owned banks expanded lending. Hence, we find that the credit supply of foreign state-controlled and privately-owned banks differs in host countries because of exogenous shocks. We also find weak evidence that foreign state control can be a transmission channel during a sovereign crisis in the home country. However, we find no evidence that foreign banks, state-controlled or privately-owned, transmit a currency crisis to a host country. Overall, our results suggest a mixed banking sector comprising foreign and domestic state-controlled banks and privately-owned banks to contribute to financial stability during domestic and international crises.