Foreign Currency Loans in Central and Eastern Europe: Did Regional Euro Internationalization Worsen Credit Quality?
Foreign Currency Loans in Central and Eastern Europe: Did Regional Euro Internationalization Worsen Credit Quality?

Author(s): Gerhard Fink, Wolfgang Rainer, Peter Haiss
Subject(s): Political economy, Financial Markets
Published by: Masarykova univerzita nakladatelství
Keywords: non-performing loans; Euro loans; foreign currency lending; foreign banks; CEE;
Summary/Abstract: We compile data about Euro denominated lending in Central and Eastern European Countries (CEE EU) during 2001-2011. Our analysis of the determinants of non-performing loans (NPL) with panel regressions for CEE EU suggests that foreign currency loans contributed significantly to the increase in NPLs, reinforced by effective changes in exchange rates, which cannot be sustained by the local borrowers. We find that there are serious limits to Euro-globalization with Euro denominated loans.

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