Bank Funding in Central, Eastern and South Eastern Europe Post Lehman: A “New Normal”?

Abstract

CESEE banks are reducing foreign funding sources in response to reduced external imbalances, reduced ability to tap international savings, banking group own strategies, initiatives by some regulators, and consistently with uncertainties surrounding the future of the banking union project. In the medium term, the global regulatory agenda and the high foreign presence and stock of FX loans exert opposite forces on rebalancing trends. In the long-term, any funding "new normal" will be determined by the future design of the EU financial architecture. In the meantime, limiting leverage, the use of FX loans and promoting aggregate saving through macro policies and capital market reforms will increase resilience against shocks going forward.

The Global Banking Network in the Aftermath of the Crisis: Is There Evidence of De-globalization?

“…Several analyses in the literature have also highlighted an increase in the regionalization of international banks through changes in the nationality of foreign affiliates. The crisis triggered the reorganization of many international bank groups, which included both their selling of foreign affiliates (Claessens and van Horen 2015) or changes in their funding model (e.g., increase in domestic deposit funding in Eastern Europe as highlighted by Impavido, Rudolph, and Ruggerone 2013). The way that we have mapped the global financial network provides us an aggregate look at these trends.…”

Global Waves of Debt: Causes and Consequences

“…With interest rates on foreign currency loans below those for domestic currency loans, and the peg interpreted as an implicit exchange rate guarantee, borrowers readily took on foreign currency debt and domestic banks offered dollarized or euro-ized accounts on a large scale to local clients (Impavido, Rudolph, and Ruggerone 2013;Magud, Reinhart, and Rogoff 2011;Spiegel and Valderrama 2003). Reliance on dollardenominated debt often ended with rising debt-to-GDP ratios when EMDE currencies eventually depreciated against the U.S. dollar.…”

Excessive credit growth or the catching up process: The case of central, eastern, and southeastern European countries

“…Another important factor that might explain why the CESEE-12 countries differ from other regions in terms of cross-border funding is the central banking model, which foreign banks have embraced as a way of doing business in the region. 4 The centralized banking model means that funding and liquidity decisions are centralized, as opposed to the decentralized model where there is a degree of funding independence for subsidiaries (Impavido et al 2013). vis-à-vis banks vis-à-vis non-banks…”