The Croatian Banking System
This paper provides an analysis of the stability of the Croatian banking sector. After the banking crisis of 1998, the Croatian banking system underwent a deep transformation process; foreign investors gained a dominating market share of more than 90% of total assets, with Austrian banks holding 43% thereof. Compared to other Central and Eastern European countries (CEECs), the degree of banking intermediation is relatively high in Croatia. In recent years, lending to the private sector and in particular to households has risen whereas lending to the general government has declined. Foreign currencies continue to play an important role in the Croatian banking sector, in particular on the liabilities side of banks balance sheets. While maintaining a large negative net foreign currency position on their balance sheets (with an increasing portion of net liabilities to nonresidents), Croatian banks overall net foreign currency position seems to be marginally positive. Still, foreign currency(-indexed) lending represents a credit risk as it entails an indirect exchange rate risk. Asset quality, by contrast, has improved significantly over the past five years, the capital adequacy ratio is on a relatively high — albeit declining — level, and real return on equity (ROE) is now as high as the profitability levels observed in other CEECs.
Main Features of Recent Banking Sector Developments in Selected Southeastern European Countries
The purpose of this paper is to provide a comparative stock-taking exercise of recent banking sector developments in four current EU candidate countries (CC-4), namely the two acceding countries Bulgaria and Romania and the two negotiating candidates Croatia and Turkey. The paper finds that a strong increase in foreign liabilities allowed boosting domestic lending in particular to households. At the same time, banks’ credit risk that results from nonbanks’ foreign exchange exposure has significantly increased. Although in recent years (1) banks’ profitability has increased, (2) their share of nonperforming assets has declined and (3) their capital adequacy ratios can currently be considered as still sufficiently high (despite the recent domestic credit expansion), considerable risks to macroeconomic and macrofinancial stability may arise if foreign liabilities and domestic credit growth continue to increase at such a rapid pace in the future.
Labour Law in a Globalising World
At the opening of the 21st century it is clear that increasing globalisation will remain one of the most important long term influences on the evolution of the international economy and international political structures. The controversial nature of globalisation is self-evident from the increasing intensity of antiglobalisation demonstrations at meetings of international bodies such as the World Trade Organisation. While the actual nature of globalisation, the direction in which it will take the world and the costs and benefits that will result are still contestable, it is clear that the main, and certainly the most effective, drivers are economic. Nations are primarily concerned to set in place structures that promote the free movement of capital including the freedom of multinational companies to locate and relocate around the world, and to promote free trade in goods and services. While non-economic values such as environmental protection and social and labour rights are not excluded from the debates setting these structures in place, they are largely marginal to it. One symbol of this marginalisation is that the ILO, unlike the World Bank, IMF and OECD, does not enjoy observer status at the WTO in spite of the rhetoric of concern for such rights from member states of the Organisation. As McCrudden and Davies explain,1 this exclusion is the result of a major and continuing division between developed and developing countries within the WTO that in the 1990s prevented agreement on any tangible measures in the Marrakesh agreements and that has continued to block subsequent progress. The stark divisions between these groups became even more apparent at the Singapore Ministerial meeting in 1996 when an invitation to the head of the ILO to speak was withdrawn. The only tangible result was a weak statement to the effect that members agreed that labour standards should be upheld but that this should be done through the ILO and not the WTO. The suspicion of developing countries that any link between trade and labour standards will lead to increased protectionism is almost certainly justified. Experience within the WTO to date provides little reason for developing countries to have any great faith in the undertakings of the developed world. Developing countries have seen the promises of movement toward freer trade that might benefit them fade into the distance while at the same time the undertakings they entered into are increasingly used to their disadvantage.2