BANKS’ VULNERABILITY AND FINANCIAL OPENNESS ACROSS CENTRAL AND EASTERN EUROPE

Simona NISTOR

Authors

Simona NISTOR Babeş-Bolyai University, Faculty of Economics and Business Administration, Teodor Mihali Street, Nr. 58-60, Cluj-Napoca 400591, Romania, Telephone: +40264418652, E-mail: simona.mutu@econ.ubbcluj.ro https://orcid.org/0000-0001-5258-9214

Keywords:

banks’ systemic vulnerability, financial openness, capital regulations.

Abstract

https://doi.org/10.1515/subboec-2017-0013

This paper investigates the impact of the degree of capital account openness on banks’ exposure to extreme events during the period 2005-2012 using a sample of financial institutions from Central and Eastern Europe. The empirical output highlights a positive and strongly significant impact of a higher degree of financial openness on banks’ systemic vulnerability. Robust findings suggest that this harmful effect is lower for foreign owned banks or for those whose bank holding company signed one or more Vienna Initiative commitment letters. On the other side, tighter capital regulations and private monitoring policies enhance the positive impact of a higher degree of capital accounts openness on banks’ vulnerability to systemic events.

JEL classification: G21, G28, G32

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