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European international banks retain a significant role in emerging Europe

Always substantial support for public and private financial needs
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The degree of financial depth, i.e. the role that banks play in the economies of CEE/SEE (Central and Eastern Europe/South East Europe) countries – measured by the ratio of total assets (TA) to GDP – shows a persistent gap between the two areas with a higher ratio in CEE Countries. Moreover, the discrepancy between individual countries in this ratio remains very high.

In CEE countries, the TA/GDP ratio ranges between 87% in Slovenia, which is slowing down, 111% in Hungary, and 132% in the Czech Republic. Among SEE Countries, the differentiation between countries is even greater, but the highest value stands out for Croatia (at 117%), which joined the euro area in January 2023, while Romania is at the opposite extreme and remains at a very low level (55%).

This differentiation between the two areas is confirmed by the spread of cash accounts, which measures the degree of financial inclusion. In fact, the growth of financial inclusion was remarkable in 2021 – according to the World Bank’s surveys – compared to 2017, in all countries, except Slovenia where it was already high (99.1%), thanks to the performance of banking aggregates and the measures taken by the central authorities to cope with the Covid-19 crisis. In all CEE countries, inclusion is high. Conversely, dispersion remains high in SEE Countries, where figures range from 44% in Albania to over 90% in CEE/HR (Croatia).

In this context, international banks play a significant role. The share of TA belonging to international banks is very high, over 70% in Croatia, Slovakia, Serbia and the Czech Republic, hence not only in the euro area member states. Most of the international banks are of course European, with parent company in Austria and Italy, first and foremost.

International banks support the financial needs of the public and private sectors in CEE/SEE countries not only with the presence of their subsidiaries, but also through cross-border flows. Among the large international banks participating in the surveys conducted by the BIS (Bank for International Settlements), European banks are obviously the most active. In all CEE/SEE countries, well over half of the foreign flows originate in Europe. The shares vary from 52% in Serbia to 91% in Slovakia and Slovenia.

The role of banks, taken as a whole, public-private, domestic and international, remains prevalent in the financial system. Non-banking financial intermediaries –representing the so-called shadow banking – are still absolutely secondary, but their presence is expected to grow, albeit very moderately in the short term.


SOURCE Intesa Sanpaolo Research Department elaborations, based on Central Bank’s data.

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