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Decomposing Financial Risks and Vulnerabilities in Eastern Europe

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  • DeLisle Worrell
  • Andrea M. Maechler
  • Srobona Mitra
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    Abstract

    This paper assesses how various types of financial risk such as credit risk, market risk, and liquidity risk affect banking stability in the ten countries that joined the European Union most recently, and eight neighboring countries. It also examines how the quality of supervisory standards may have mitigated the vulnerabilities arising from these risk factors. Using panel data, the study finds substantial variation in the impacts of financial risks, the macroeconomic environment, and supervisory standards on banks'' risk profile across different country clusters. Credit quality is of general concern especially in circumstances where credit growth is accelerating.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/248.

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    Length: 33
    Date of creation: 01 Oct 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/248

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    Related research

    Keywords: Financial stability; European Union; Financial risk; Bank soundness; Bank supervision; Economic models; credit; banking; banking supervisors; payment systems; connected lending; bank stability; return on assets; consolidated supervision; bank size; bank ownership; credit policy; bank credit; banking stability; bank groups; payments; banks ? loan; macroeconomic stability; prices; current account deficits; bank-specific risks; bank risk; banks ? balance sheets; banking system; foreign exchange; bank for international settlements; banking supervision; bank insolvency; pricing; national bank; current account; internal control; banking sector; bank entry; prudential regulation; reserve requirements; banking crises; shareholders; capital adequacy; banks loan; banking industry; banking systems; banks ? balance sheet; excess demand; bank exposures; risk of bank failure; systemic risk; bank portfolios; bank # supervisors; bank failure; foreign exchange market; bank funding; bank conduct; credit risk management; bank structure; bank supervisors; bank insolvency risk; bank risk exposure; liquid asset;

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    References

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    Cited by:
    1. Pavla VODOVÁ, 2013. "Liquidity Ratios of Polish Commercial Banks," European Financial and Accounting Journal, University of Economics, Prague, vol. 2013(3).
    2. de Walque, Gregory & Pierrard, Olivier & Rouabah, Abdelaziz, 2009. "Financial (In)stability, Supervision and Liquidity Injections: A Dynamic General Equilibrium Approach," CEPR Discussion Papers 7202, C.E.P.R. Discussion Papers.
    3. Ghosh, Saibal, 2010. "Credit Growth, Bank Soundness and Financial Fragility: Evidence from Indian Banking Sector," MPRA Paper 24715, University Library of Munich, Germany.
    4. Berger, Allen N. & Hasan, Iftekhar & Korhonen, Iikka & Zhou, Mingming, 2010. "Does diversification increase or decrease bank risk and performance? Evidence on diversification and the risk-return tradeoff in banking," BOFIT Discussion Papers 9/2010, Bank of Finland, Institute for Economies in Transition.

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