The Impact of International Financial Crisis on Bank Performance in Eastern and Central European Countries

In this paper we investigate the determinants of bank profitability in 10 countries from Central and Eastern Europe, in the period between 2004 and 2013. We proxy the profitability of banks with more commonly used ratio: the return on assets (ROA), computed as a ratio of the net profit to the total bank assets. We used multiple regression with bank specific variables, banking industry variables and macroeconomic variables. Moreover, we added a global financial crisis dummy to highlight the crisis impact on asset return. OLS is the main estimation method, but we also used difference-in-difference in order to test if the crisis impact was amplified or diminished by the bank specific characteristics. The evidence shows significant differences between the profit levels of the CEEC banks. Our results are in line with the empirical literature. The impact of the international financial crisis on ROA was negative and statistically significant, as expected. The second part of the analysis we separate the banks sample in three categories: banks with high capital adequacy, large banks by total assets and foreign-owned banks. Our findings show that the three selected variables both amplified and decreased the crisis effect

The effectiveness of policy interventions in CEE countries

This paper assesses the effectiveness of intervention measures adopted by central authorities during 2005-2012 in CEE. We investigate their impact on bank stability in 15 countries from CEE using bank-level data and OLS estimation method. The bank stability is proxied by the natural logarithm of the Z-Score and the non-performing loans to gross loans ratio. Empirical findings suggest that interest rates cuts, as well as domestic and foreign liquidity injections have a significant impact on bank stability in Emerging Europe. Moreover, their effectiveness differs according to several bank characteristics. Policy measures adopted by CEE countries significantly reduced the stability of domestic banks, but increased the stability of banks with a lower level of capitalization. The impact on the Z–score of banking system liquidity policy measures and the policy interest rates cuts is significantly lower in the case of domestic banks, amplified for less-capitalized banks (except for the category regarding banks’ solvency), while their impact on large banks remains statistically insignificant