FASE 2: EVALUACIÓN DE LA FUERZA MEDIANTE PLATAFORMA

(percentage; year on year)

50 40 30 20 10 0 -10 50 40 30 20 10 0 -10 2002 2003 2004 2005 2006 2007 2008 2009 Turkey Croatia FYR Macedonia

loans) are high despite a decline since 2006. In Croatia, loan loss provisions as a share of non-performing loans have declined to 42.5%.

4.4 FUNDING STRUCTURES OF BANKING SYSTEMS

The structure of bank fi nancing may have implications for the financial stability of individual countries. Banks typically fund their balance sheets in layers, starting with a capital base comprising equity, subordinated debt and hybrid instruments, plus medium and long-term senior debt. The next layer consists of customer deposits: even though they can be withdrawn at short or no notice, they are assumed to be a stable source of fi nancing as long as the general banking system’s health and fi nancial safety nets ensure continued investor confi dence. On the other hand, relying heavily on deposits tends to add pro-cyclicality to banks’ lending behaviour when local liquidity conditions tighten. However, other forms of domestic

fi nancing, such as via wholesale or inter-bank

markets, tend to be even more volatile during periods of market stress.

The relevance of foreign fi nancing has been a distinctive feature of the funding structure of banking systems in emerging economies in recent years. In fact, before the crisis, the global economy was characterised by low interest rates and risk premia and abundant liquidity. Banks’ leverage expanded rapidly and the growth in loan stocks was only partly offset by the growth in deposits. Given the availability of ample liquidity, it was not diffi cult for banks in emerging economies to raise funds from abroad. Until the onset of the crisis, the balance of evidence seemed to support the view that foreign

fi nancing was a stabilising force for host markets in the presence of a deterioration in the business cycle and during periods of fi nancial distress (Goldberg, 2009). Much of the analysis, however, had been in the context of shocks originating in emerging markets, and the literature did not rule out the possibility that a local banking system could be hit by shocks that

Table 25 Shock-absorbing factors

(percentage)

2002 2003 2004 2005 2006 2007 2008 2009

Loan loss provisions

Croatia 67.9 60.9 62.5 60.0 57.0 54.7 49.5 42.5

FYR Macedonia 90.4 91.4 102.7 110.8 113.6 132.6 133.5 112.6

Turkey 64.2 88.5 88.1 88.7 89.7 86.8 79.8 83.6

of which:

Loan loss provisions for household loans

Croatia 61.4 53.0 69.9 66.2 62.6 67.0 63.8 60.6

FYR Macedonia n.a. n.a. 102.7 100.4 116.3 125.6 104.9 91.7

Turkey 69.0 94.3 83.7 82.5 85.1 80.9 76.7 86.6

Loan loss provisions for corporate loans

Croatia 68.4 62.0 57.4 56.4 52.2 45.3 38.1 33.0

FYR Macedonia n.a. n.a. 112.7 108.4 108.9 127.9 140.0 117.6

Turkey 64.0 88.4 88.6 90.2 91.2 89.0 81.2 81.9

Non-performing loans net of provisions

Croatia 19.6 22.6 19.0 16.7 14.0 11.3 12.8 22.2

FYR Macedonia 4.6 0.0 -4.7 -5.7 -6.0 -11.3 -11.3 -5.7

Turkey 14.5 2.8 1.7 1.6 1.5 1.8 3.3 3.2

Capital adequacy ratio

Croatia 16.6 15.7 14.1 13.5 13.2 15.4 14.2 15.8

FYR Macedonia 28.1 25.8 23.0 21.3 18.3 17.0 16.2 16.4

Turkey 25.6 31.0 28.8 23.7 21.8 18.9 18.0 20.5

Source: National sources.

F E A T U R E S

seriously affected banks in advanced economies, as demonstrated by the latest crisis.70 _These shocks might be large and more diffi cult for the local authorities to deal with by themselves. Lending fl uctuations in host market economies in response to external shocks may also refl ect the composition of banks’ exposure to various sources of foreign fi nancing. Local banks are likely to be affected differently by global liquidity conditions according to their relative exposure to funding in wholesale international interbank markets, as opposed to fi nancing directly from their own international banking groups’ headquarters or related affi liates (“internal capital market”). More generally, subsidiaries of large global groups may fi nd it easier to raise funds in international fi nancial markets, as information barriers are likely to be more limited for these entities and, even when wholesale international markets dry up, they may still have access to fi nancial support from their parent group, largely on account of the long-term nature of the investment and reputational considerations (Winkler, 2009).71 A general look at banks’ funding structures in the countries under review at the onset of the global crisis highlights similarities but also signifi cant differences (see Chart 10). Such differences reflect not only national and institutional factors, such as prudential regulations and the relevance of foreign ownership, but could also be explained by the level of sophistication of the banks’ business models and of domestic fi nancial markets, as well as by differences in asset composition. For instance, less mature banking systems tend to be more reliant on retail deposits for their funding, and this is indeed the case in all countries under review. In the case of the former Yugoslav Republic of Macedonia, customer deposits accounted for 70% of banks’ total liabilities in 2007; in comparison, their shares were substantially lower in Turkey (60%) and markedly so in Croatia (53%), where the relative importance of customer deposits as a funding source has signifi cantly decreased since 2001.72 By contrast, the external liability position of banks in Croatia was relatively high, larger than

The response of the Japanese banks to the capital and real estate 70

market collapse in the early 1990s is indicative of how banks in advanced economies can transmit domestic fi nancial shocks to foreign markets (Peek and Rosengren, 1997).

By contrast, in the Asian crisis in the 1990s, as domestic banks 71

had engaged in maturity transformation fi nanced by short-term loans from many western banks on the basis of an arm’s length relationship, international lenders did not have information about the long-term solvency of the borrowers in host markets. Nor had they particular incentives to acquire such information, given the short-term nature of their engagement.

By comparison, in 2007 deposits accounted, on average, 72

for around 39% of total liabilities of European banks (ECB, 2009).