The Study On Influence Factor Of Banking Systemic Risk In Five Central And Eastern European Countries(2000-2012)

Five Central and Eastern European countries have successively completed the banking reform in the early 21st century. Foreign Banks occupy the dominant position, so the banking system in these countries become more vulnerable. In order to facilitate the regulatory supervision, it is necessary to discuss the influence factors of banking systemic risk. In this paper, on the basis of the predecessors, we comprehensively use both macro and micro index to analyze Central and Eastern European banking systemic risk. First of all, using index evaluation method roughly measure five Central and Eastern European countries’banking systemic risk from 2004 to 2011. Preliminary findings show that:Before 2006 banking systemic risk in five Central and Eastern European countries gradually reduce. The most stable performance is during 2006-2007. After the subprime crisis in 2008, the five central and eastern European countries banking systemic risk overall rose. But the five central and eastern European countries performed differently in banking systemic risk after 2009. Secondly, we take three-step regression model (basic regression model, adding GDP restriction factor regression model, adding financial openness restriction factor regression model) to study influence factors behind banking systemic risk in 2000-2012 of these five countries. The results show that:1. the Central and Eastern European banking systemic risk decline gradually until 2006 since they have complete banking sector reform in the early 21st century.2.2008 financial crisis affected the stability of banking sector mainly through the international trade channels because the five central and eastern European countries’economies are highly dependent on the European Union trade. The empirical regression results verified the viewpoint. Also both high foreign funding dependence and high foreign debt dependence characteristics make banking sector more vulnerable through investors expect channel. In fact foreign banks didn’t withdrawal a large number of money from the five Central and Eastern European countries. On the contrary, the empirical results show that foreign capital promoted the stability of the central and eastern European banking sector, improved the return on bank assets, reduced the non-performing loan ratio. Economic development level influence the foreign banks play a role in host countries. Both cash flow channel and financial institutions channel have no significant impact on transferring 2008 financial risk to these five countries Although in 2008 subprime crisis, there has been no mass withdrawal of foreign funds in five Central and Eastern European countries, their governments needs to improve the "three highs" situation, diversify trading partners, reduce the dependency ratio of foreign debt and improve the situation of foreign banks controlling domestic banking industry to further safeguard the stability of their Banking.