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Shadow Banking in Central and Eastern Europe: Specificities and Drivers

Author

Listed:
  • Bethlendi András

    (András Bethlendi, Ph.D., Associate Professor, Budapest University of Technology and Economics, Faculty of Economic and Social Sciences, Department of Finance, Hungary, 1111 Budapest, Műegyetem rkp. 3. Hungary)

  • Mérő Katalin

    (Katalin Mérő, Ph.D., Associate Professor, Budapest Business School, Faculty of Finance and Accountancy, Department of Finance, Hungary)

  • Orlovits Zsanett

    (Zsanett Orlovits, Associate professor, Budapest University of Technology and Economics, BME Faculty of Mechanical Engineering, Department of Mechatronics, Optics and Mechanical Engineering Informatics, Hungary)

Abstract

The paper analyses the specificities and drivers of the shadow banking (SB) system in eleven Central and Eastern European (CEE) EU member states for 2004-2019. It contributes to the understanding of the CEE SB in terms of how the structural features of the financial and banking system determine its development. The SB system of the region is much smaller, and its structure is less complex and significantly different from that of developed European countries: the role of capital market intermediaries is smaller, while the role of nonbank lenders is larger. Specific features of the CEE financial system include the dominance of banks, the relative underdevelopment of capital markets, the dominance of foreign ownership, and, until the mid-2010s, the reliance on foreign interbank funding in several countries. Indeed, as the results of our panel regression show, regional specificities in the structural characteristics of financial systems are key for the development of the SB.

Suggested Citation

  • Bethlendi András & Mérő Katalin & Orlovits Zsanett, 2024. "Shadow Banking in Central and Eastern Europe: Specificities and Drivers," South East European Journal of Economics and Business, Sciendo, vol. 19(2), pages 13-29.
    • Handle: RePEc:vrs:seejeb:v:19:y:2024:i:2:p:13-29:n:1002
    DOI: 10.2478/jeb-2024-0013
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    References listed on IDEAS

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    1. Abad, Jorge & D'Errico, Marco & Killeen, Neill & Luz, Vera & Peltonen, Tuomas A. & Portes, Richard & Urbano, Teresa, 2017. "Mapping the interconnectedness between EU banks and shadow banking entities," ESRB Working Paper Series 40, European Systemic Risk Board.
    2. Franklin Allen & Douglas Gale, 2001. "Comparative Financial Systems: A Survey," Center for Financial Institutions Working Papers 01-15, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Franklin Allen & Douglas Gale, 2001. "Comparing Financial Systems," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511258, December.
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    Cited by:

    1. Mérő, Katalin, 2025. "Az európai tőkepiaci unió és az árnyékbankrendszer - összefonódások és ellentmondások [The European Capital Markets Union and the shadow banking system - interconnectedness and contradictions]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1207-1225.
    2. Troplini Rovena Vangjel & Uku Skënder & Mamaqi-Kapllani Xhevrije, 2025. "The Dynamic Interplay between Credit Risk and Monetary Policy in Albania’s Banking Sector: A Comprehensive Analysis," South East European Journal of Economics and Business, Sciendo, vol. 20(2), pages 34-52.

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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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