Chapter 3

Country-level data may mask substantial intra-country variation in the presence of foreign banks. To illustrate this, Chart 3.2.1 shows new data on the geographical coverage of the branch networks of foreign and domestic banks across 18 emerging European countries. Two findings stand out.

First, foreign banks typically operate extensive networks in countries where they have established a presence. Branches are generally widespread (the blue and green dots) and not just clustered around the capital or main cities. This reflects the fact that foreign banks have often entered a country by buying banks with extensive existing branch networks. Consequently, it is not only firms and households in urban agglomerations which have access to the services of foreign banks, but those in more remote areas as well. This may alleviate concerns about “cherry-picking” by foreign banks (see main text).

Second, the chart shows clear cross-country variation in the presence of foreign banks. In the Czech and Slovak Republics and parts of the Balkan region particularly, there are very few localities where only domestic banks operate (the red dots). Further east, and especially in Belarus, Moldova, Romania and Ukraine, there are still many villages where firms only have access to domestic bank services. In Poland, on the other hand, there is extensive competition between foreign and domestic banks in cities and villages across the country.

Source: Beck et al. (2012).
Note: Each dot indicates the geo-coordinates of a location (village or larger) with at least one bank branch. Red dots indicate locations where only domestic banks operate; blue dots locations where only foreign banks operate; and green dots locations where both domestic and foreign banks operate.