The Consequences of Post-Crisis Regulatory Architecture for Banks in Central Eastern Europe

Abstract

In response to the financial crisis of 2008, the global banking industry has been undergoing fundamental regulatory changes, imposed by the Basel III Agreement, the 2010 US Dodd-Frank Act and the introduction of a new European supervisory structure. This paper analyses the possible long-term impact of this new regulatory framework on the banking sectors of CEE-5 countries. The aim of this paper is to contribute to the discussion on the anticipated long-term impact of the new regulatory environment for bank stability and efficiency, with a focus on host countries from Central and Eastern Europe. The main research question is whether the post crisis regulatory and supervisory architecture, based on a new macro and micro institutional framework, will have a positive impact on banks in CEE. To answer these questions, we analyse the condition of CEE-5 banking sectors. In particular, we are looking how banks in CEE-5 reacted to two different periods: the pre-crisis period of a dynamic economic and credit market growth and the period of global economic and financial collapse (2008), using DEA methodology, measures of market competitive conditions and bank stability index Z-score.

Macro determinants of shadow banking in Central and Eastern European countries

“…countries share, one can include: they are open economies, with average exports of about 80% of G.D.P. in 2017 (with the exception of Croatia, Romania and Poland, which have the largest domestic markets); they have already well-established EU legal rules and standards; they have low wages, educated workforce, and relatively fast economic growth, particularly in the pre-crisis period (Miklaszewska, Mikołajczyk, & Pawłowska, 2012); and they have similar stock market characteristics (Karanovic & Karanovic, 2018).…”

Efficiency in European Central Banks: The Role of Economic Freedom

“…In the banking sector, in general [11] explain that regulatory restrictions cause higher interest rates in commercial banks in the EU. Miklaszewska et al [17] suggest that post-crisis regulation in the EU will have a negative long-term impact on the growth of European banking. In contrast, some studies find that greater economic openness, in terms of foreign bank penetration, will produce a decrease in bank margins and improve the efficiency of banking systems [18,19].…”

Macroeconomic Consequences of New Prudential Regulation in the Banking Sector

“…The first adjusting mechanisms have to raise the level of banks' lending rates and limiting access to them. Within five years, it is expected that level of interest rates on loans will increase, in countries with 364 basis points and the appearance of an additional capital requirement at the level of $ 1.3 24 billion. However, it was considered that these are the costs for short term, and longer-term changes will bring benefits to achieving financial stability.…”