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Foreign Currency Lending in Central, Eastern and Southeastern Europe: The Case of Austrian Banks

Author

Listed:
  • Johannes Pann

    (Oesterreichische Nationalbank)

  • Reinhardt Seliger

    (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division)

  • Julia Übeleis

    (Oesterreichische Nationalbank)

Abstract

This paper describes the exposure of Austrian banks to foreign currency loans in Central, Eastern and Southeastern Europe and the CIS and elaborates on its risks to banking sector stability. Austrian banks’ foreign currency loan exposure more than doubled between 2005 and 2009, their regional subsidiaries’ foreign currency loan exposure continued to be higher than the market average in this period. Our findings confirm the key importance of funding risks and do not contradict the assumption of a nonlinear relationship with regard to credit risk. However, a simple comparison of risk indicators does not unambiguously indicate an overall higher credit risk in the foreign currency loan portfolio. Most recent data suggest that Austrian banks’ foreign currency loan exposure is declining. Policymakers are now called upon to use the momentum and strike a balance between restricting foreign currency lending to foster a more sustainable growth path and avoiding negative procyclical effects.

Suggested Citation

  • Johannes Pann & Reinhardt Seliger & Julia Übeleis, 2010. "Foreign Currency Lending in Central, Eastern and Southeastern Europe: The Case of Austrian Banks," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 20, pages 56-76.
    • Handle: RePEc:onb:oenbfs:y:2010:i:20:b:1
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Clemens Jobst & Claudia Kwapil, 2019. "Monetary policy of the Eurosystem and the OeNB’s balance sheet," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 19/Q1-Q2, pages 85-98.
    2. Nicolas Albacete & Pirmin Fessler & Martin Schürz, 2012. "Risk Buffer Profiles of Foreign Currency Mortgage Holders," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 23, pages 58-71.
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    4. Raphael Auer & Sebastien Kraenzlin, 2011. "International liquidity provision during the financial crisis: a view from Switzerland," Review, Federal Reserve Bank of St. Louis, vol. 93(Nov), pages 409-418.
    5. Raphael Auer & Sebastien Kraenzlin & David Liebeg, 2012. "How Do Austrian Banks Fund Their Swiss Franc Exposure?," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 24, pages 54-61.
    6. Paweł Smaga, 2013. "Wpływ Europejskiej Rady Ryzyka Systemowego na stabilność finansową w UE," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 5-35.
    7. Glocker, Christian & Url, Thomas, 2022. "Financial sector rescue programs: Domestic and cross border effects," Journal of International Money and Finance, Elsevier, vol. 127(C).
    8. Clemens Jobst & Claudia Kwapil, 2019. "Monetary policy of the Eurosystem and the OeNB’s balance sheet," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1-Q2/19, pages 85-98.
    9. Pistor Katharina, 2012. "Governing Interdependent Financial Systems: Lessons from the Vienna Initiative," Journal of Globalization and Development, De Gruyter, vol. 2(2), pages 1-25, January.

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    More about this item

    Keywords

    Austrian banks; Eastern Europe; foreign currency loan; banking sector stability; credit risk;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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