Are Foreign-Owned Commercial Banks Exposed to the External Shocks in the Home Countries? The Case of the Central and Eastern European Countries

The financial systems of the Central and Eastern European countries (CEECs) are bank-based and dominated by foreign-owned commercial banks with relatively. In most of the CEECs foreign banks from neighboring countries dominate in terms of assets and number of participants (except Slovenia), e.g. Scandinavian banks operate in the Baltic countries, Austrian, Belgian and French banks in Czech Republic, etc. The aim of the research to assess the impact of the macroeconomic conditions in home countries on changes of lending conditions in the host countries. The empirical results suggest that host country effect in terms of real GDP and inflation on lending conditions is strong and statistically significant while home country effect is prolonged and less significant. However, these empirical results suggest that banking sectors of the CEECs are exposed to the external shocks and decisions of parent banks' shareholders.