engleski

Impact of deleveraging on banking profitability

The purpose of this paper is to recognize the reaction of banks, mainly changes regarding their balance sheets, to challenges arising from new bank regulation and supervision. As a result of financial crisis that occurred in the United States in 2007 and became global very soon, the regulators introduced new regulatory framework known as Basel III standards. The intention is to identify the effect of deleveraging on bank profitability by regression analysis on data about performance of banks in the Republic of Croatia in period from 2007 to 2015. Banks' response to new regulation was by improving their capital position or deleveraging. The thesis shows that as Croatian banks were well capitalized even in pre-crisis period, they have started deleveraging process after 2011 by reducing their liabilities towards major foreign shareholders. Simultaneously, their profitability was decreased.

financial crisis; deleveraging; profitability; regression analysis; Croatian banking system

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