Financial fragility or what went right and what could go wrong in central European banking?
Despite the fact that banks in Central Europe are burdened by extraordinarily high bad loan ratios, the recent financial crisis in South East Asia and Russia, has not led to a massive failure of banks in the region. In this paper, we study economic trends and policies that may have helped to insulate CEECs from international financial contagion. Answering what went right over the past few years may not only help to further positive developments, but it may also highlight possible weaknesses that could result in future financial instabilities in the banking sectors of CEECs. Using data available from the IMF, and the BIS for nine Central European economies (Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, and Slovenia), our results indicate that an economic constellation unique to the early transition period rather than deliberate policy decisions have stabilized the CEECs. Specifically, the lack of recent banking crisis can be attributed to a lack of overly optimistic credit expansion, despite several years of real economic growth, to underdeveloped asset markets, and to a decline of trade relations with the former Soviet Union. Future problems may arise as banks are beginning to extend credit more to an expanding real sector than in the past, as asset markets become more developed, or as export growth to the EU may decline with European growth slowing down. Thus, improvements in bank regulation and bank supervision should receive a high priority among policy makers in CEECs.
|Date of creation:||1999|
|Date of revision:|
|Contact details of provider:|| Postal: Walter-Flex-Straße 3, D - 53113 Bonn|
Web page: http://www.zei.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harald A Benink & David T Llewellyn, . "Deregulation and Financial Fragility: A Case Study of the UK and Scandinavia," Research Papers 94/4, CENTRE FOR RESEARCH IN EUROPEAN ECONOMICS AND FINANCE (CREEF).
- Reinhart, Carmen & Kaminsky, Graciela & Lizondo, Saul, 1998.
"Leading Indicators of Currency Crises,"
6981, University Library of Munich, Germany.
- Guillermo A. Calvo & Fabrizio Coricelli, 1993.
"Output Collapse in Eastern Europe: The Role of Credit,"
IMF Staff Papers,
Palgrave Macmillan, vol. 40(1), pages 32-52, March.
- Guillermo Calvo & Fabrizio Coricelli, 1992. "Output Collapse in Eastern Europe; The Role of Credit," IMF Working Papers 92/64, International Monetary Fund.
- Christian Weller, 2001.
"The Finance-Investment Link in a Transition Economy: Evidence For Poland From Panel Data,"
Comparative Economic Studies,
Palgrave Macmillan, vol. 43(1), pages 31-52, April.
- Weller, Christian E., 1999. "The finance-investment link in a transition economy: Evidence for Poland from panel data," ZEI Working Papers B 04-1999, University of Bonn, ZEI - Center for European Integration Studies.
- Fleming, Alex & Talley, Samuel, 1996. "The Latvian banking crisis : lessons learned," Policy Research Working Paper Series 1590, The World Bank.
- Weller, Christian E., 1999.
"Financial liberalization, multinational banks and credit supply: The case of Poland,"
ZEI Working Papers
B 10-1999, University of Bonn, ZEI - Center for European Integration Studies.
- Christian Weller, 2000. "Financial Liberalization, Multinational Banks and Credit Supply: The case of Poland," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(2), pages 193-211.
- Reinhart, Carmen & Kaminsky, Graciela, 2000.
"Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
[The twin crises: Te causes of banking and balance of payments problems]," MPRA Paper 13842, University Library of Munich, Germany.
- Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
- Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
- Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
- International Monetary Fund, 1992. "Bank Insolvency and Stabilization in Eastern Europe," IMF Working Papers 92/9, International Monetary Fund.
- Jeffrey A. Frankel & Andrew K. Rose, 1996.
"Currency crashes in emerging markets: an empirical treatment,"
International Finance Discussion Papers
534, Board of Governors of the Federal Reserve System (U.S.).
- Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
- Daniel C. Hardy & Ashok Kumar Lahiri, 1992. "Bank Insolvency and Stabilization in Eastern Europe," IMF Staff Papers, Palgrave Macmillan, vol. 39(4), pages 778-800, December.
- Garber, Peter M, 1996. "Managing Risks to Financial Markets from Volatile Capital Flows: The Role of Prudential Regulation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(3), pages 183-95, July.
- Herman W. Hoen, 1998. "The Transformation of Economic Systems in Central Europe," Books, Edward Elgar Publishing, number 848, April.
- IstvÃ¡n Ã bel & Pierre L. Siklos & IstvÃ¡n P. SzÃ©kely, 1998. "Money and Finance in the Transition to a Market Economy," Books, Edward Elgar Publishing, number 830, April.
- Weller, Christian E. & Scher, Mark J., 1999. "Multinational banks and development finance," ZEI Working Papers B 16-1999, University of Bonn, ZEI - Center for European Integration Studies.
- John P. Bonin & KÃ¡lmÃ¡n Mizsei & IstvÃ¡n P. SzÃ©kely & Paul Wachtel, 1998. "Banking in Transition Economies," Books, Edward Elgar Publishing, number 1286, April.
When requesting a correction, please mention this item's handle: RePEc:zbw:zeiwps:b131999. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.