The international financial and economic crisis highlights that central banks should go beyond their traditional emphasis on low inflation to adopt an explicit goal of financial stability. Our paper addresses this highly topical issue of macro-prudential framework with the focus on effectiveness of monetary policy in affecting some financial stability indicators, in the experience of several Central and Eastern European countries during 2003M01-2012M06. Using a Structural Vector Autoregressive model and impulse response function, we analyze the impact of short-term interest rates upon industrial production, loan to deposit ratio for the banking system, stock prices and exchange rate (proxy variables for financial stability). We want to test if the interest rate is conducive to financial stability. Our empirical results show that the effectiveness of the short-term interest rate in affecting selected asset prices depends on monetary policy strategy. In the case of the Czech Republic, Hungary, Poland and Romania, the interest rate instrument used for inflation targeting is conducive to financial stability. Among countries with a fixed exchange rate regime, only in Bulgaria does transmission of the foreign interest rate impulse to domestic variables promote financial stability. Additionally, our results show that in Latvia and Lithuania adjustments to the monetary policy of the European Central Bank (ECB) are not in accordance with country-specific conditions. The paper contributes to a policy debate on the design of macro-prudential polices in the aftermath of the boom-bust cycle experienced by the Central and Eastern European countries in the second half of the last decade. JEL classification codes:: E52, C58, G01

This paper examines the impact of monetary policy on bank risktaking and the influence of the recent financial crisis on this relation. We use a dataset of 571 commercial banks from Eurozone and analyze the relation on the period from 1999 to 2011, with emphasize on the period 2008 to 2011. We use non-performing loans, loan loss provisions and Z-score as measures for bank risk-taking, while for monetary policy the proxies are short-term interest rates (computed using a Taylor rule) and long-term interest rates. We determine the relation between the two by taking into account some specific control variables and analyze it using an entity fixed-effects model and Generalized Method of Moments, alternatively. Empirical results point to a negative relation between interest rates and bank risk-taking. In addition to this, results show that the crisis has led to an additional negative impact on the relation between interest rates and bank risk-taking for the turmoil period 2008-2011.

By performing an econometric analysis of the credit cycle and business cycle from an individual as well as a comparative perspective, with a focus on ten relevant economies from the areas of Central, Eastern, and Southeastern Europe, this research offers a fresh view regarding the importance of banks in promoting long-term economic growth through their lending capacity. The purpose is to better understand the behavior (the short-and medium-term dynamics) of the credit cycle and business cycle and the effects of the interactions between them. The results of this study offer valuable insights for both academics and policymakers and provide a warning to regulators not to overregulate or put too much pressure on banking activity.

Foreign banks represent important channels for the transfer of productive resources, managerial and organizational skills and experience accumulated on international level, which led to increased competition in the banking market in Romania, which contributed to some extent to the profitability of the Romanian banking sector. The purpose of the current attempt of research is the analysis of the structural evolution of the banking sector in Romania, under the impact of foreign direct investments (FDI). Analyzing the structural evolution of the Romanian banking sector, there can be observed that in 2015, FDI has influenced some important merger operations on a level with branches of foreign banks in Romania, and over 85% of the total capital of the banking system in our country belongs to credit institutions with foreign majority ownership and to their branches. Regarding the origin of the foreign capital of credit institutions, it originates from the member states of the European Union (EU). It is also worthy of note that in 2015, the top ten banks in the banking sector of Romania held 71.6% of the assets, while the remaining 26 banks held a share of only 28.4% of the market. Banca Comercială Română, BRD - Groupe Société Générale and Banca Transilvania are in 2015 the main banks in the Romanian banking system, with a major market share.

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