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A New Model for Balanced Growth and Convergence

A New Model for Balanced Growth and Convergence

Achieving Economic Sustainability in CESEE Countries

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

This topical book addresses the need for emerging economies in Central, Eastern and South-Eastern Europe to find a new, sustainable growth model that fosters continued convergence with the EU without leading to the build-up of new vulnerabilities.

Chapter 14: Banks’ challenges in Central and Eastern Europe

Radovan Jelašić

Subjects: economics and finance, financial economics and regulation, international economics, money and banking


The banking sector in Central and Eastern Europe (CEE) is facing historical challenges on several fronts. First of all, not only has banker-bashing by politicians become a daily exercise, but fiscal measures such as a banking tax or a financial transactions tax are endangering the basic business model of the entire financial sector. Moreover, these actions have come on top of the constantly increasing regulatory requirements imposed by local and European Union (EU) lawmakers since the outbreak of the recent financial crisis in 2008. Secondly, macroeconomic uncertainties are posing a substantial challenge, especially in countries with traditionally unbalanced growth dynamics reflected in excessive foreign currency borrowing, high levels of public debt or lending booms financed mainly by foreign funding. Therefore, countries with a relatively low inflation rate, low budget deficits and low public spending have not undergone major gross domestic product (GDP) downward adjustments.

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