Foreign Currency Lending in Central, Eastern and Southeastern Europe: The Case of Austrian Banks

Johannes Pann (), Reinhardt Seliger () and Julia Übeleis ()
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Johannes Pann: Oesterreichische Nationalbank
Reinhardt Seliger: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division
Julia Übeleis: Oesterreichische Nationalbank

Financial Stability Report, 2010, issue 20, 56-76

Abstract: This paper describes the exposure of Austrian banks to foreign currency loans in Central, Eastern and Southeastern Europe and the CIS and elaborates on its risks to banking sector stability. Austrian banks’ foreign currency loan exposure more than doubled between 2005 and 2009, their regional subsidiaries’ foreign currency loan exposure continued to be higher than the market average in this period. Our findings confirm the key importance of funding risks and do not contradict the assumption of a nonlinear relationship with regard to credit risk. However, a simple comparison of risk indicators does not unambiguously indicate an overall higher credit risk in the foreign currency loan portfolio. Most recent data suggest that Austrian banks’ foreign currency loan exposure is declining. Policymakers are now called upon to use the momentum and strike a balance between restricting foreign currency lending to foster a more sustainable growth path and avoiding negative procyclical effects.

Keywords: Austrian banks; Eastern Europe; foreign currency loan; banking sector stability; credit risk (search for similar items in EconPapers)
JEL-codes: F34 G15 G21 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (9)

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