The return of political risk: Foreign-owned banks in Eastern Europe

Gabor, D. and Kudrna, Z. (2013) The return of political risk: Foreign-owned banks in Eastern Europe. Europe Asia Studies, 65 (3). pp. 548-566. ISSN 0966-8136 Available from:

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Political risk—risk that investments are damaged by policy action of authorities—increased during the financial crisis due to controversies about the distribution of accumulated losses among stakeholders. Authorities interconnected by cross-border banks considered unilateral policies that minimised losses for domestic stakeholders at the expense of their foreign counterparts. This is at odds both with the assumption behind financial integration which presumes multilateral responses to cross-border shocks and with the typical definition of political risks that ignores the fact that not only host-country, but also home-country authorities can create such risks. This paper recasts the definition of political risk and reviews instances when political risk materialised within the EU banking market between 2007 and 2011. The analysis reveals that the EU regulatory framework needs to be enhanced to contain resurgent political risks systematically rather than through ad hoc interventions of the EU and international bodies.

Item Type: Article
Uncontrolled Keywords: political risk, crisis, foreign-owned banks, Eastern Europe, cross-border crisis resolution
Faculty/Department: Faculty of Business and Law > Department of Business Management
Depositing User: Professor D. Gabor
Date Deposited: 28 Nov 2013 09:46
Last Modified: 06 Nov 2016 16:55


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