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Banking sector development and financial stability in the run up to EU accession

  • Henk Brouwer

    (De Nederlandsche Bank)

  • Ralph de Haas

    (De Nederlandsche Bank)

  • Bas Kiviet

    (De Nederlandsche Bank)

Registered author(s):

    The EU accession countries have made remarkable progress in developing their financial sectors. Nevertheless, potential risks to banking sector stability remain. We take stock of these risks, with a focus on the challenges posed by the EU accession process. Important potential risks we identify are consistently large current account deficits possibly combined with more volatile short-term financing in the future, imprudent financing of lending booms, increasing currency mismatches in the banking and corporate sector, substantial exchange rate volatility, and lagging legislation and supervision. Risks can be limited by taking advantage of the presence of foreign banks, keeping current account deficits within limits, taking financial stability considerations into account in determining exchange rate policies, guaranteeing the independence of the central bank and supervisory authorities, and strengthening the rule of law.

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    Paper provided by EconWPA in its series Macroeconomics with number 0209003.

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    Date of creation: 11 Sep 2002
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    Handle: RePEc:wpa:wuwpma:0209003
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