Risk Taking by Banks in the Transition Countries

20 Pages Posted: 21 Dec 2006

See all articles by Rainer F. H. Haselmann

Rainer F. H. Haselmann

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Paul Wachtel

New York University - Stern School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: December 19, 2006

Abstract

In this paper we examine risk taking and risk management with the help of a new survey data set from EBRD. We do so in this paper with the familiar balance sheet and income data prepared by Bank Scope and also with information from the EBRD's 2005 survey of bank managers. We find no indication of excessive risk taking by any specific group of transition banks. Overall banking markets in transition economies are relatively homogenous with only small differences among the average bank operating in different regions, belonging to different ownership groups or having a different size. Interestingly, we find no connection between the level of risk banks take and the institutional environment they operate in. Nevertheless, banks that operate in an unsound environment generally maintain a higher level of capital. Furthermore, banks with higher risk measures compared to their competitors also do more risk management activities. This suggests that banks in transition economies have learned how to manage their risks by now.

Keywords: banking risk, default probability, credit risk, transition banking

JEL Classification: F34, F37, G21, G28, G33, K39

Suggested Citation

Haselmann, Rainer F. H. and Wachtel, Paul, Risk Taking by Banks in the Transition Countries (December 19, 2006). Available at SSRN: https://ssrn.com/abstract=952949 or http://dx.doi.org/10.2139/ssrn.952949

Rainer F. H. Haselmann (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Mertonstrasse 17-25
Frankfurt am Main, D-60325
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Paul Wachtel

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~pwachtel

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