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Do bank activities and funding strategies of foreign and state‐owned banks have a differential effect on risk‐taking in Central and Eastern Europe?
Author(s) -
Lapteacru Ion
Publication year - 2019
Publication title -
economics of transition and institutional change
Language(s) - English
Resource type - Journals
eISSN - 2577-6983
pISSN - 2577-6975
DOI - 10.1111/ecot.12185
Subject(s) - business , differential (mechanical device) , state (computer science) , renting , financial system , deposit insurance , differential effects , finance , political science , medicine , algorithm , computer science , law , engineering , aerospace engineering
This paper explores the differential effects of the activity and funding strategies of foreign and state‐owned banks in Central and Eastern European countries on risk‐taking. Due to potentially beneficial external support, the disciplinary role of non‐deposit funding is completely ineffective for both foreign and state‐owned banks. Most likely, because of survival beliefs, non‐deposit financiers deposit their money even when state‐owned banks become riskier. Involvement in non‐interest‐income activities has no impact on the risk‐taking of foreign banks and worsens the risk of state‐owned institutions. However, both types of banks are risky when involved in trading, insurance income, rental and other non‐banking businesses.