world (according to the size of their global assets as of December 2002).<sup>5</sup> In particular, we focus on their presence in Latin America and Eastern Europe.<sup>6,7</sup> Table 1 lists the top 100 commercial banks in the world, specifies their country of origin, and indicates the type of operations ― branch or subsidiary ― that these banks have (if any) in Latin America and Eastern Europe.<sup>8</sup> Also, to establish the degree to which each bank has international operations, we report the number of countries where each bank is present. On average, the top 100 banks have operations in more than 15 countries worldwide. Dutch banks have the highest country average, with operations in more than 38 countries. Also, a clear regional pattern emerges from this table. U.S. and Spanish banks are dominant in the Latin American region. German and Italian banks are the key players in Eastern and Central Europe.

The operations of these 100 banks capture most of the foreign bank activity in the host countries in Latin America and Eastern Europe (Table 2).<sup>9</sup> We define a foreign subsidiary as a locally incorporated bank with a foreign shareholder who owns at least 50% of the shares.<sup>10</sup>

> 5 Among the top 100 banks, we did not include banks which were owned (50 percent or more of the shares) by another large bank. For example, Bank Austria Creditanstalt AG and Credit Lyonnais SA were not included in the top 100 list because their main shareholders as of 2002 were Bayerisque Hypo-un Vereisbank AG and Credit Agricole S, both in the top 100 list. The shareholder data structure was obtained from Bankscope.

> 6 In Latin America, we examine international bank operations in Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, and Uruguay. In Eastern Europe, we focus on Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia, Slovak Republic, and Turkey.

7 While it is possible that our sample selection might introduce certain biases, we believe these are unlikely to be relevant for at least two main reasons. First, since our sample covers the large majority of foreign banks operating in the countries considered, we are confident that limiting our sample to the top 100 banks will have little impact on the findings. Second, focusing on Latin America and Eastern Europe is justified by the fact that foreign presence in other parts of the world (most notably in Asia) has been very small until very recently.

8 Branches operating in a country as a branch of a top 100 subsidiary incorporated in a developing country were coded as a subsidiary. The top 100 bank is under no legal obligation to honor those branches liabilities in excess of their developing country subsidiary.

9 We eliminated Colombia from our sample because Colombian legislation does not allow the entry of foreign bank branches.

10 There were only 5 cases in our sample in which a bank in the top 100 list had an equity participation below 50 percent, so we believe that imposing the 50 percent ownership rule when identifying subsidiaries is not likely to bias our estimations. In other words, our sample does not exclude many cases of equity participations below the criteria used to identify subsidiaries.

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