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The Indebtedness to the Banking Sector in the New EU Member States from Central and Eastern Europe: the Challenges of the Debt Management, Post-crisis National Policies and EU Reforms in the Financial Sector

Tatiana Houbenova

The banking systems' exposure to nonperforming loans in the new EU member states from Central and Eastern Europe (CEE) presents a typical feature of the present financial crisis. The evaluation of the opportunities and threats for debt reduction process takes into account the risks experienced by the banking systems in CEE and their prospects and peculiarities for the post crisis development within the framework of the banking reform in the EU.The paper tests two hypothesis in order to specify the risk profiles of the banking systems of 10 countries from CEE and the banking prospects for the post-crisis period.The two hypothesis tested involve; 1)The indebtedness to the banking systems' has different features for each country and thus there is a variety of the risk profiles of the banking systems. 2) The banking sector in the CEE's countries shows a strong pro cyclical tendency that aggravates the difficulties of the credit crunch and of inadequate financing of the economies. The methodology applied in the study involves as follows:1) a selection of a set of indicators for evaluating the risks of the banking assets in the bank systems under review; 2) methodology for comparative analysis of bank indebtedness indicators for the period (2000-2013) to assess the procyclical impact of the banking sectors; 3) comparative analysis of the sectoral structure of the nonperforming bank loans and their overall impact on the performance of the banking system as regards liquidity, capital adequacy, profitability and solvency.The paper discusses the EU reforms in the banking sector and the prospects of the CEE countries to improve the capacity of the bank capital to absorb the shocks from market failures and crisis contagion and to contribute to the revival of economic growth.



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