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Ivan Huljak

20 August 2015
OCCASIONAL PAPER SERIES - No. 164
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Abstract
This paper reviews financial stability challenges in countries preparing for EU membership, i.e. Albania, Bosnia and Herzegovina, Kosovo*, Iceland, the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey. The paper has been prepared by an expert group of staff from the European System of Central Banks (ESCB) in which experts from EU candidate and potential candidate country central banks also participated. The paper finds that near-term challenges to financial stability primarily relate to credit risks from the generally weak economic dynamics in combination with already high non-performing loan burdens in many banking systems, especially in the Western Balkans. In the medium-term, challenges to financial stability stem from indirect market risks to banks related to foreign currency lending as well as lingering exposures to funding risks, with Western Balkan economies again appearing as relatively more vulnerable. Looking further ahead, the paper highlights that the magnitude of the challenge to reach a
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
F34 : International Economics→International Finance→International Lending and Debt Problems
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
24 May 2018
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2018
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Abstract
Improving operating efficiency is key if euro area banks are to raise their profitability to sustainable levels. The FSR has been consistently reporting on the basis of accounting indicators, such as the cost-to-income ratio (CIR) and the cost-to-assets ratio, that, on aggregate, euro area banks’ cost efficiency has deteriorated somewhat since 2010. While the improving cyclical environment is supporting bank profitability, raising it to levels that can ensure banks are able to provide financing to the real economy in a sustainable manner would benefit from improving their cost efficiency.
1 August 2019
WORKING PAPER SERIES - No. 2305
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Abstract
We use an industrial organisation approach to quantify the size of Total Factor Productivity Growth (TFPG) for euro area banks after the crisis and decompose it into its main driving factors. In addition, we disentangle permanent and time-varying inefficiency in the banking sector. This is important because lack of distinction may lead to biased estimates of inefficiency and because the set of policies needed in both cases is different. We focus on 17 euro area countries over the period 2006 to 2017. We find that cost efficiency in the euro area banking sector amounted to around 84% on average over the 2006 to 2017 period. In addition, we observe that Total Factor Productivity growth for the median euro area bank decreased from around 2% in 2007 to around 1% in 2017, with technological progress being the largest contributor, followed by technical efficiency. Given the need to boost productivity and enhance profitability in the euro area banking sector, these findings suggests that bank’s efforts in areas such as rationalisation of branches, digitalisation of business processes and possibly mergers and acquisitions should be intensified.
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
15 May 2020
WORKING PAPER SERIES - No. 2411
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Abstract
We contribute to the empirical literature on the impact of non-performing loan (NPL) ratios on aggregate banking sector variables and the macroeconomy by estimating a panel Bayesian VAR model for twelve euro area countries. The model is estimated assuming a hierarchical prior that allows for country-specific coefficients. The VAR includes a large set of variables and is identified via Choleski factorisation. We estimate the impact of exogenous shocks to the change in NPL ratios across countries. The main findings of the paper are as follows: i ) An impulse response analysis shows that an exogenous increase in the change in NPL ratios tends to depress bank lending volumes, widens bank lending spreads and leads to a fall in real GDP growth and residential real estate prices; ii ) A forecast error variance decomposition shows that shocks to the change in NPL ratios explain a relatively large share of the variance of the variables in the VAR, particularly for countries that experienced a large increase in NPL ratios during the recent crises; and iii ) A three-year structural out-of-sample scenario analysis provides quantitative evidence that reducing banks' NPL ratios can produce significant benefits in euro area countries in terms of improved macroeconomic and financial conditions.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General