Foreign Bank Presence and The Stability of Retail Banking in Emerging Markets

Ⅰ. Introduction Ⅱ. Defining Subject Countries Ⅲ. Literature Review, Problem Definition, & Methodology Ⅳ. Macroeconomic Developments Ⅴ. Banking Sector Developments Ⅵ. The Stability of Retail Banking Ⅶ. ConclusionsForeign bank participation in some emerging market economies has risen dramatically over the last two decades. Retail banking has also risen to become an immensely important banking segment in a number of those same countries. Previous literature has asserted that financial instability is not necessarily intrinsic to foreign bank entry. However, a discussion which combines foreign bank entry and the rise of retail banking with financial stability has yet to emerge. This paper contributes to the literature by analyzing the impact of retail banking developments on financial stability, specifically in emerging markets with high foreign bank participation. Here, we statistically demonstrate retail is indeed a crucial banking segment in those countries. Though, we find evidence suggesting a correlation between foreign banks, retail banking and instability in only a few cases. To the contrary, retail bank lending has remained relatively stable in a number of countries despite the unfavorable global economic environment that developed in the wake of the 2008 financial crisis