Bank Risk in Central and Eastern European Countries: Does Ownership Matter?

Our main objectives are to estimate the risk of Central and Eastern European banks and determine its factors focussing on the role of ownership structures. We apply market-based risk measures and an improved Z-score and conclude that foreign and private banks are less risky than state-owned institutions. Moreover, a higher proportion of interbank deposits amplifies the risk of foreign banks and reduces that of public institutions. The effect of longterm funds is negative for state-owned banks with market-based measure, whereas it is positive with accounting-based measure. Another result is the negative impact of the concentration on interest-bearing activities on the risk of all banks regardless their ownership structure. Finally, the enforcement of the banking regulation reduces the risk of foreign banks and increases that of public institutions.