Decomposing Financial Risks and Vulnerabilities in Eastern Europe

35 Pages Posted: 16 Jan 2008

See all articles by Andrea Michaela Maechler

Andrea Michaela Maechler

International Monetary Fund (IMF)

Srobona Mitra

International Monetary Fund (IMF)

DeLisle Worrell

DeLisle Worrell and Associates, Inc.

Abstract

This paper assesses how various types of financial risk such as credit risk, market risk, and liquidity risk affect banking stability in the ten countries that joined the European Union most recently, and eight neighboring countries. It also examines how the quality of supervisory standards may have mitigated the vulnerabilities arising from these risk factors. Using panel data, the study finds substantial variation in the impacts of financial risks, the macroeconomic environment, and supervisory standards on banks' risk profile across different country clusters. Credit quality is of general concern especially in circumstances where credit growth is accelerating.

Keywords: Working Paper, Financial risk, Europe, Bank soundness, Bank supervision, Economic models

JEL Classification: E44, D53

Suggested Citation

Maechler, Andrea Michaela and Mitra, Srobona and Worrell, DeLisle, Decomposing Financial Risks and Vulnerabilities in Eastern Europe. IMF Working Paper No. WP/07/248. Available at SSRN: https://ssrn.com/abstract=1083406

Andrea Michaela Maechler (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Srobona Mitra

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

DeLisle Worrell

DeLisle Worrell and Associates, Inc. ( email )

Glenisla
Fisherpond
St. Jospeh BB21000
Barbados

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