Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment
This Occasional Paper reviews financial stability challenges in countries preparing for EU membership with a candidate country status, i.e. Croatia (planned to accede to the EU on 1 July 2013), Iceland, the former Yugoslav Republic of Macedonia, Montenegro and Turkey. It follows a macro-prudential a...
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ftrepec:oai:RePEc:ecb:ecbops:2012136 2024-04-14T08:13:52+00:00 Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment Beck, Roland Macki, Piotr Hake, Mariya Stankeva Jimborean, Ramona Evdjic, Stefanie Manolov, Stoyan Ostrovskis, Gundars Pulst, Daniela Francart, Alexandre Cocozza, Emidio Ĉervená, Marianna Langfield, Sam Lovin, Horatiu https://www.ecb.europa.eu//pub/pdf/scpops/ecbocp136.pdf unknown https://www.ecb.europa.eu//pub/pdf/scpops/ecbocp136.pdf preprint ftrepec 2024-03-19T10:25:18Z This Occasional Paper reviews financial stability challenges in countries preparing for EU membership with a candidate country status, i.e. Croatia (planned to accede to the EU on 1 July 2013), Iceland, the former Yugoslav Republic of Macedonia, Montenegro and Turkey. It follows a macro-prudential approach, emphasising systemic risks of financial systems as a whole. After recalling that some EU candidate countries went through a pronounced boom-and-bust credit cycle in recent years, the paper identifies current challenges for the bank-based financial sectors as mainly stemming from: (i) high or rising domestic credit risk; (ii) unhedged borrowing in foreign currencies; and (iii) strains related to the euro area debt crisis, which is impacting the EU candidate countries via a number of channels. The main channels of transmission of the euro area debt crisis to the EU candidate countries operate via: (i) trade and foreign direct investment; (ii) an increased market focus on sovereign risk; and (iii) "deleveraging", e.g. via a decline of external funding to local subsidiaries of EU parent banks. A macro-stress-test exercise performed by the national authorities of the EU candidate countries in February 2012 suggests that large capital buffers can absorb a shock to credit quality stemming from a drop in economic activity in the EU and renewed strains from the euro area debt crisis. With respect to supervisory practices, the paper finds that the EU candidate countries have made good progress, but some gaps with respect to international and EU standards remain. JEL Classification: F32, F41, G21, G28 banking sector, deleveraging, emerging markets, Europe, foreign currency lending, macro-prudential approach, macro stress test, vulnerability indicators Report Iceland RePEc (Research Papers in Economics) |
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This Occasional Paper reviews financial stability challenges in countries preparing for EU membership with a candidate country status, i.e. Croatia (planned to accede to the EU on 1 July 2013), Iceland, the former Yugoslav Republic of Macedonia, Montenegro and Turkey. It follows a macro-prudential approach, emphasising systemic risks of financial systems as a whole. After recalling that some EU candidate countries went through a pronounced boom-and-bust credit cycle in recent years, the paper identifies current challenges for the bank-based financial sectors as mainly stemming from: (i) high or rising domestic credit risk; (ii) unhedged borrowing in foreign currencies; and (iii) strains related to the euro area debt crisis, which is impacting the EU candidate countries via a number of channels. The main channels of transmission of the euro area debt crisis to the EU candidate countries operate via: (i) trade and foreign direct investment; (ii) an increased market focus on sovereign risk; and (iii) "deleveraging", e.g. via a decline of external funding to local subsidiaries of EU parent banks. A macro-stress-test exercise performed by the national authorities of the EU candidate countries in February 2012 suggests that large capital buffers can absorb a shock to credit quality stemming from a drop in economic activity in the EU and renewed strains from the euro area debt crisis. With respect to supervisory practices, the paper finds that the EU candidate countries have made good progress, but some gaps with respect to international and EU standards remain. JEL Classification: F32, F41, G21, G28 banking sector, deleveraging, emerging markets, Europe, foreign currency lending, macro-prudential approach, macro stress test, vulnerability indicators |
format |
Report |
author |
Beck, Roland Macki, Piotr Hake, Mariya Stankeva Jimborean, Ramona Evdjic, Stefanie Manolov, Stoyan Ostrovskis, Gundars Pulst, Daniela Francart, Alexandre Cocozza, Emidio Ĉervená, Marianna Langfield, Sam Lovin, Horatiu |
spellingShingle |
Beck, Roland Macki, Piotr Hake, Mariya Stankeva Jimborean, Ramona Evdjic, Stefanie Manolov, Stoyan Ostrovskis, Gundars Pulst, Daniela Francart, Alexandre Cocozza, Emidio Ĉervená, Marianna Langfield, Sam Lovin, Horatiu Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment |
author_facet |
Beck, Roland Macki, Piotr Hake, Mariya Stankeva Jimborean, Ramona Evdjic, Stefanie Manolov, Stoyan Ostrovskis, Gundars Pulst, Daniela Francart, Alexandre Cocozza, Emidio Ĉervená, Marianna Langfield, Sam Lovin, Horatiu |
author_sort |
Beck, Roland |
title |
Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment |
title_short |
Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment |
title_full |
Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment |
title_fullStr |
Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment |
title_full_unstemmed |
Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment |
title_sort |
financial stability challenges for eu acceding and candidate countries: making financial systems more resilient in a challenging environment |
url |
https://www.ecb.europa.eu//pub/pdf/scpops/ecbocp136.pdf |
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Iceland |
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Iceland |
op_relation |
https://www.ecb.europa.eu//pub/pdf/scpops/ecbocp136.pdf |
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1796311951690694656 |