Determinants of bank credit to the private sector - a case study from CESEE countries - Economicus

by, Rilind Ademi

Abstract

The banking sector constitutes almost all of the financial sector in the CESEE countries, and on the other hand loan as a traditional banking product increasingly seen as an measurement of bank performance. The CESEE countries have been through a credit boom during the period between 2002-2008 with a credit growth of 30-35% per year, but with the appearance of the financial crisis, these rates lowered to near zero and remained
at those disappointing level until the present days. The purpose of the study is to analyze the factors in the period 1994-2014 that describe the banking specifics that may affect bank credit to the private sector. The model which estimates more reliable results is the GMM (Generalized Method of Moments), with a coefficient of determination 0,54. The Credit growth, spread of the interest rates, deposit growth, ROA are important factors that positively affect the loan, while the real interest rate, the ratio of capital to assets and international financial integration appear as important factors which negatively affect on crediting .