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Bank Risk-Taking in CEE Countries

Georgios Kouretas () and Chris Tsoumas ()
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Chris Tsoumas: University of Piraeus

Central European Journal of Economic Modelling and Econometrics, 2013, vol. 5, issue 2, 103-123

Abstract: This study examines whether the lowering interest-rate environment in CEE countries since the early 2000’s increased bank risk-taking behaviour. We employ 6,979 annual observations from the Bankscope database over the period 1997-2011 and find a positive relationship between bank risk-taking, measured by risk assets, and interest rates. On the contrary, there is a negative relationship between non-performing loans and interest rates. These results are robust across a number of different specifications that account, inter alia, for the potential endogeneity of interest rates and/or the dynamics of bank risk. Moreover, we provide evidence that these findings are mainly driven by the banking sector of the Russian Federation rather than that of the rest CEE countries.

Keywords: interest rates; bank risk-taking; panel data; russian and CEE banks (search for similar items in EconPapers)
JEL-codes: E43 E52 G21 (search for similar items in EconPapers)
Date: 2013
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