Cyclicality of the banking sector performance and macro environment in the Czech republic, Slovakia and Slovenia

Mejra Festić and Dejan Romih

Prague Economic Papers, 2008, vol. 2008, issue 2, 99-117

Abstract: An exposure to macroeconomic risk factors across banks is a source of systemic risk that influences the banking sector performance. In this paper, we present some evidence on macroeconomic variables affecting the non-performing loans (NPL) ratio in the Czech Republic, Slovakia and Slovenia. The GDP growth might have improved borrowers' ability to serve their bank loans in Slovenia, meanwhile the accelerating NPL ratio dynamics has failed to support the hypothesis that the GDP growth fosters an improvement in the NPL ratio in the case of Slovakia. Meanwhile deceleration in the NPL ratio on export impulses has supported a procyclical theory in the Czech Republic, Slovakia and Slovenia. The response of non-performing loans to inflation supports the hypothesis about the lowering inflation that decelerates the NPL ratio. Savings have accelerated the NPL ratio in the case of Slovakia and Slovenia. The banking sector performance is possibly reflecting a favourable assessment of the economic growth and an increasing indebtedness of private sector could become causes of concern if the macroeconomic environment should develop less favourably.

Keywords: economic growth; non-performing loans; macro impulses; cyclicality (search for similar items in EconPapers)
JEL-codes: F47 G15 G21 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (8)

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DOI: 10.18267/j.pep.323

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