Focus on European Economic Integration Q2/05

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• Focus on European Economic Integration 2/05 (PDF, 1,2 MB) Juni 2005.

Studien und Analysen

• Editorial (PDF, 74 kB) Focus on European Economic Integration 2/05 en 30.06.2005, 00:00:00

• Developments in Selected Countries (PDF, 352 kB) Barisitz – Focus on European Economic Integration 2/05 en 30.06.2005, 00:00:00

• Banking in Central and Eastern Europe since the Turn of the Millennium — An Overview of Structural Modernization in Ten Countries (PDF, 264 kB) Barisitz. Barisitz – Focus on European Economic Integration 2/05 This study gives an analytical overview of the evolution of the banking sectors of ten relatively large Central and Eastern European countries (Hungary, Poland, the Czech Republic, Slovakia; Bulgaria, Romania, Croatia, Serbia; Russia and Ukraine) since 1999—2000. Set in the period following the banking crises and painful transformation of the 1990s, the analysis focuses on the newest structural changes and modernization in an environment of generally strong growth. The emphasis is on salient features of the development of banking regulation and supervision, banks' major sources of assets, liabilities, earnings and related changes, bank restructuring, rehabilitation programs and the role of foreign banks and FDI. Conclusions sum up the main findings on a comparative basis: Selling banks to foreign strategic investors has generally paid off, although there are some exceptions. The ongoing swift dissemination of IT and e-banking may help reconcile the seeming paradoxes of these countries being "overbanked" and "underbanked" at the same time. The near-ubiquitous credit boom, while embodying a welcome structural catching-up process, is not without dangers and has not yet been fully brought under control. Even in relation to the region's modest income levels, consumption of banking products remains low in Central and Eastern Europe. Thus, there is still ample room for expansion. en 30.06.2005, 00:00:00

• Developments in Credit to the Private Sector in Central and Eastern European EU Member States: Emerging from Financial Repression — A Comparative Overview (PDF, 321 kB) Backé. Backé, Zumer – Focus on European Economic Integration 2/05 This article provides an overview of developments in credit to the private sector in Central and Eastern European EU Member States in the period from 1999 to 2004. It discusses the main determinants of credit expansion, explores its impact on economic developments and examines policy implications. The paper also reviews how the issue of credit growth has featured in the monetary integration process of new Member States so far. The analysis shows that (i) lending to the private sector has grown dynamically in most but not all countries under review, (ii) loans to households have risen dynamically in all countries and (iii) foreign currency lending has been sizeable, in particular in countries with pegged exchange rates. Credit growth has been promoted by macroeconomic stabilization, comprehensive reforms and privatization in the financial sector and by the introduction of market institutions and legal reforms. Financial depth in most new Member States continues to be comparatively low, which suggests that credit growth will tend to be high, especially over the medium term. In those countries that have recorded fast and persistent private sector credit growth in recent years, current account deficits have moved above levels that can be deemed sustainable over a longer period of time. Our analysis thus corroborates the case for keeping macroeconomic vulnerabilities in check by containing domestic demand growth and current account deficits to sustainable levels over the medium term in the countries concerned. en 30.06.2005, 00:00:00

• Can Banking Intermediation in the Central and Eastern European Countries Ever Catch up with the Euro Area? (PDF, 327 kB) Arpa, Reininger, Walko. Arpa, Reininger, Walko – Focus on European Economic Integration 2/05 This paper focuses on the private credit flow-to-GDP ratio for measuring and comparing the degree of banking intermediation, which complements the widely used stock-flow measure. The authors find that, on the basis of this flow-flow measure, the current degree of banking intermediation in most Central and Eastern European countries (CEECs) is significantly closer to the euro area average than suggested by the traditional stock-flow measure. Nevertheless, the longer-term average of annual figures of the recent past indicates that most CEECs still have some way to go to catch up with intermediation in the euro area in a persistent manner, even on the basis of the flow-flow measure. Furthermore, the authors analyze the implications of the different concepts of convergence in the degree of banking intermediation. According to simulations, maintaining a flow-flow ratio in the CEECs equal to the euro area average of the past ten years (i.e. given full convergence in the flow-flow ratio) will also lead to convergent stock-flow ratios. However, this will only be the case at a rather late point in time, i.e. not before the end of this century, and will thus come considerably later than convergence in GDP per capita at purchasing power parity (PPP). On the other hand, for the CEECs to simultaneously achieve convergence in the stock-flow ratio and in per capita income levels, the flow-flow ratios would have to significantly and persistently exceed the euro area average of the period from 1994 to 2003 for a period of between 15 and 50 years, depending on the respective country. Drawing on the experience of major catching-up economies in the past 50 years worldwide, the authors do not completely exclude, but take a rather skeptical view on, the possibility of realizing in a sustainable manner the high level of the flow-flow ratio that would be required for the simultaneous convergence in the stock-flow ratio and in per capita income levels. en 30.06.2005, 00:00:00

• The Banking Sector of Bosnia and Herzegovina: The Dominant Role of Austrian Banks (PDF, 286 kB) Mágel. This study analyzes the development of the banking sector of Bosnia and Herzegovina until the end of 2004. After a brief description of the institutional and macroeconomic background, it covers the ownership structure and concentration in the banking sector, the degree of financial intermediation, the structure of the aggregated balance sheet and the role of foreign exchange in the banking sectors' balance sheet. Finally, this paper investigates the development of capital adequacy and profitability. The author finds that macroeconomic stabilization (on the back of a currency board arrangement) and the market entry of foreign banks supported the reform process in the banking sector and helped deepen financial intermediation, while leading to a relatively high concentration of banking sector assets. The author argues that the main challenges for the banking sector in Bosnia and Herzegovina are first, to increase (longer-term) lending to nonfinancial corporations; second, to keep its overall net foreign currency position under control amidst the domestic household lending boom; third, to closely monitor the development of asset quality; and fourth, to further improve the banking sector's operational efficiency. en 30.06.2005, 00:00:00

• The Implementation of the Basel Core Principles in Selected Countries from the Perspective of the International Monetary Fund (PDF, 222 kB) Ettl, Schober-Rhomberg. Ettl, Schober-Rhomberg – Focus on European Economic Integration 2/05 This study examines the implementation of the Basel Core Principles (BCPs) based on the Financial System Stability Assessments (FSSAs) carried out by the International Monetary Fund (IMF) in Bulgaria, the Czech Republic, Germany, Croatia, Hungary, Austria, Poland, Romania, Russia, Slovenia, Slovakia and Ukraine. From the perspective of Austria's financial sector, these countries are of particular interest owing to Austrian banks' investment focus on Central and Eastern European countries (CEECs). The 25 Core Principles, which were developed by the Basel Committee on Banking Supervision in 1997, in collaboration with international bank supervisors, the IMF and the World Bank, represent minimum requirements for good banking governance and an efficient supervisory system. The seven supervisory areas examined, to which the BCPs relate, are: preconditions for effective banking supervision, licensing and structure of banks, prudential regulations and requirements, methods of ongoing banking supervision, information requirements, formal powers of supervisors and cross-border banking. By comparing BCP implementation in the relevant countries, the strengths and weaknesses of financial regulation and banking supervision can be identified and a need for action to strengthen the supervisory regime can be inferred. en 30.06.2005, 00:00:00

• The CEEC Website (PDF, 100 kB) Kirova – Focus on European Economic Integration 2/05 en 30.06.2005, 00:00:00

• Selected Abstracts (PDF, 88 kB) Silgoner – Focus on European Economic Integration 2/05 en 30.06.2005, 00:00:00

• Real Estate Markets and Capital Flows in the Context of EU Accession (PDF, 84 kB) Pemmer – Focus on European Economic Integration 2/05 en 30.06.2005, 00:00:00

• The "East Jour Fixe" of the Oesterreichische Nationalbank (PDF, 95 kB) Barisitz – Focus on European Economic Integration 2/05 en 30.06.2005, 00:00:00

• Statistical Annex (PDF, 114 kB) Focus on European Economic Integration 05/2 en 30.06.2005, 00:00:00