The Causes and Nature of the Rapid Growth of Bank Credit in the Central, Eastern and South-eastern European Countries

Arcalean, Calin; Calvo-Gonzalez, Oscar; Móré, Csaba; Rixtel, Adrian Van; Winkler, Adalbert; Zumer, Tina

doi:10.1057/9781137001542_2

Cited by 18 publications

(14 citation statements)

References 42 publications

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“…Credit booms are associated with rising risks and vulnerabilities. The literature on the traditional banking sector (see, for example, Arcalean et al, 2005) suggests that these vulnerabilities are the result of (a) a deterioration of lending standards, (b) currency mismatches, partly driven by cross-border borrowing and (c) the fight for market shares. This section analyses whether these risk factors also affected the microfinance sector in the pre-crisis credit boom.…”

Section: The New Boom-bust Relationship In Microfinancementioning

confidence: 99%

“…Investment projects are evaluated on the basis of more optimistic estimates of future cash flows and of inflated asset prices and collateral values (Wolfson, 2002). Furthermore, banks are confronted with strains on management and lower risk-assessment capacities during the boom due to the large number of loans issued, often combined with a lack of sufficiently qualified staff (Arcalean et al, 2005;Hernández and Landerretche, 1999). As long as the credit boom continues, the risks associated with these features remain largely hidden, as new loans -issued on a massive scale -do not show quality problems.…”

Section: Deterioration Of Lending Standardsmentioning

confidence: 99%

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From Boom to Bust: How Different Has Microfinance Been from Traditional Banking?

Wagner¹

2012

Development Policy Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper presents an in-depth analysis of developments in the microfinance sector before and after the Lehman Brothers collapse in 2008 by comparing them with developments in traditional banking sectors of emerging market economies and developing countries. The findings indicate that microfinance has been part of the same credit boom observed in the traditional banking sector. Moreover, as in the traditional banking sector, the boom was fostered by substantial inflows of foreign capital. This raises the question whether the crisis resilience the microfinance sector has shown in the past remains a characterizing feature of microfinance or whether the same risk factors associated with excessive credit growth lead -as in the traditional banking sector -to greater vulnerability.The findings indicate that microfinance markets with strong capital inflows, high credit growth rates and rapidly increasing competition experienced a substantial decrease in credit growth and deterioration of portfolio quality in the post-Lehman period. This is in line with the evidence found for the traditional banking sector in emerging markets and developing countries. The paper concludes that by becoming part of the global financial system, microfinance has lost one of the characteristics which distinguish it from traditional banking, namely its higher resilience towards crises in domestic and global financial markets.

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Section: The New Boom-bust Relationship In Microfinancementioning

confidence: 99%

Section: Deterioration Of Lending Standardsmentioning

confidence: 99%

From Boom to Bust: How Different Has Microfinance Been from Traditional Banking?

Wagner¹

2012

Development Policy Review

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“…Unfortunately data availability does not allow for more detailed bank credit data disaggregation. 7 See Arcalean et al, (2005) …”

Section: Methodsmentioning

confidence: 99%

A re-assessment of credit development in European transition economies

Zdzienicka¹

2011

International Economics

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The aim of the paper is to re-assess the bank credit development in 11 Central and Eastern European countries and to provide new estimates of the credit-to-GDP ratio equilibrium level. Using filtering methods and dynamic panel estimations, our results suggest an "excessive" credit development for most of the studied economies until 2007. After this period, while credit has continued to remain excessive in Bulgaria, Hungary, Poland and Slovakia, it has decelerated in the other countries. However, while the results suggest a possibility of "credit crunch" in the Baltic republics and, to a less extent, in Croatia, credit deceleration may lead to "soft landing" for the Czech Republic, Romania and Slovenia.

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“…In Slovenia, the average was around 10 per cent. Only in Poland, the Czech Republic and Slovakia had credit growth been below 5 per cent and at times even negative (Arcalean et al 2007). The credit growth persisted, and in some countries even accelerated in the following years.…”

Section: Into the Voidmentioning

confidence: 99%

Into the Void: Governing Finance in Central and Eastern Europe

Pistor¹

2012

Economies in Transition

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Twenty years after the fall of the iron curtain-which for decades had separated East from West-most countries of Central and Eastern Europe are now members of the European Union; some have even adopted the euro. Nonetheless, these countries have also remained exceptionally vulnerable to upset, including those that originate beyond their immediate sphere of influence as revealed by the global financial crisis. This paper explains this with the governance of finance, i.e., the allocation of de jure and de facto responsibilities for financial systems, which deprives host countries of capital flows of critical policy tools.

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The Causes and Nature of the Rapid Growth of Bank Credit in the Central, Eastern and South-eastern European Countries

Cited by 18 publications

References 42 publications

From Boom to Bust: How Different Has Microfinance Been from Traditional Banking?

From Boom to Bust: How Different Has Microfinance Been from Traditional Banking?

A re-assessment of credit development in European transition economies

Into the Void: Governing Finance in Central and Eastern Europe

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