THE INFLUENCE OF FOREIGN BANKS’ ENTRY ON THE MAIN MACROECONOMIC INDICATORS IN THE (EMERGING) HOST ECONOMIES. CASE STUDY: ROMANIA, HUNGARY AND BULGARIA

• Main Authors: MORUTAN Radu Alin, GAVRILUT Darie, BADULESCU Daniel
• Format: Article
• Language: deu
• Published: University of Oradea 2020-07-01
• Series: Annals of the University of Oradea: Economic Science
• Subjects: Foreign bank assets; CEE countries; macroeconomics indicators
• Online Access: http://anale.steconomiceuoradea.ro/volume/2020/n1/006.pdf

There is an impressive number of studies concerning the effects of the presence of foreign banks on the economy of the host countries. However, the positions and views concerning this topic are immensely diverse. Moreover, the relationships between the two elements may not be unidirectional, given that they depend on many factors, as the global, conjunctural or structural events, or trends in the analyzed time period. Foreign banks can present the host market with several benefits, namely: a reduction in the cost of financial intermediation, an increase in the quality of offered services and products, increased access to financial services, imposing prerequisites and provisions upon demanding debtors to obtain useful medium- and long-term benefits, increased competition levels and diversity of products and services available on the home market, stimulating the diffusion of technology and spread of know-how, acceleration of reform in the field of management, risk management, corporate governance, etc. International banks, by having a diversified and efficient structure, can more easily absorb and cope with the shocks that take place on host markets, and can be considered as being a key source for a stable source of capital. In the same time, we must not forget that the presence of foreign banks can also bring forth and involve costs and risks for the host country: often foreign banks tend to select only the best customers, thus affecting the availability and activity of indigenous banks in the process of granting loans to the real sector, especially to small and medium-sized companies. In some instances, foreign banks may be a channel by which shocks in the bank’s home country are transmitted, and may affect the provision and granting of loans in the host country, thus contributing to the appearance of financial instability. In this paper, we intend to examine the impact of foreign banks’ presence in several countries in Central and Eastern Europe (Romania, Hungary and Bulgaria) in order to understand how foreign participation in the banking sector in the aforementioned countries has had an effect on the economic macro-stability of these countries, and whether the entry of foreign banks into the banking systems of each host state follows a similar model. We are also interested in finding out whether the trends are maintained over time, or are significantly influenced by the socio-economic, political and conjunctural particularities of each country. Finally, we want to find out whether the recent economic and financial crisis has decisively changed the behavior of foreign banks and the relationship with the analyzed macroeconomic indicators.