Civic Review· VOL 17. Special Issue, 2021, 173–186., DOI: 10.24307/psz.2021.0013
The stability of banking systems is a fundamental requirement for any national economy. Instability in the banking system and the consequent possible bank failures pose a threat to the functioning of the whole economy through a chain of infection. The crisis of 2008-2009 also highlighted the vulnerability of banking systems, creating the need for stricter capital and liquidity requirements for banks. Tightening the rules could also carry the risk of “over-regulation” in mega-markets, which might also worsen the profitability of financial institutions. The study examines the changes in the profitability of the banking system of the European Union and Hungary over the period between 2008 and 2019, as well as the impact of the tightening regulations on the ratio of non-performing loans.
Journal of Economic Literature (JEL) codes: G21, G28, H12
Keywords: banking regulation, profitability, non-performingloans