THE DEPENDENCE OF CEECs ON FOREIGN BANK CLAIMS: DIRECT AND INDIRECT RISKS OF CAPITAL WITHDRAWAL

Sophie Brana and Delphine Lahet

No wp1023, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: CEECs are characterised by a significant presence of foreign banks and by a marked dependence upon financing from foreign bankers. We show that this situation leaves these countries open to two types of financial risk, which have grown throughout the present decade. The first relates to the direct financial exposure between European creditor countries and CEECs and the risk of sudden withdrawal of capital. The second, which is indirect, is associated with the risk of regional contagion via spill-over effects and the common creditor channel. Based on a synthetic measure of these risks, we show that the degree of vulnerability of each country to the recent financial crisis could have been anticipated.

Keywords: Eastern Europe; banking risks; foreign claims; contagion; subsidiaries. (search for similar items in EconPapers)
JEL-codes: F23 F32 F36 G01 G21 (search for similar items in EconPapers)
Pages: pages
Date: 2011-11-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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