The financial stability and access to financing of SMEs in Hungary

The present study was prepared within the framework of cooperation between the Competitiveness Research Centre, operating within the Institute of Business Economics of Corvinus University of Budapest, and the National Association of Entrepreneurs, based on a commission from the latter. Th e goal of the study was to survey the self-financing capabilities and borrowing opportunities of majority Hungarian-owned small and medium-sized enterprises (SMEs), and to identify potential problems. The results of the research revealed that the high proportion of owner’s equity in the financing structure is not due to difficulties with borrowing, but because enterprises that cover their fi nancing primarily from their own resources have other financing opportunities at their disposal. Although general satisfaction with banks shows a diminishing tendency, it can still be interpreted favourably. The majority of companies have not encountered serious borrowing difficulties. With regard to the system of competitive tenders, company managers have sensed some improvement, but general satisfaction is still lacking. Although the research results suggest that the primary obstacle to growth in 2013 was not the lack of credit or external funding, it is important to emphasize that start-ups, young enterprises and micro-enterprises, which struggle the most with financing worries, were not represented in the analysed database.

Regular and Irregular Banking Regulation Some thoughts on the issues in banking regulation

What is irregular banking regulation? And: why is irregular a regulation? These are the two main questions this analysis tries to launch and examine – at least formulate some legal issues for further consideration, discussion and research. The banking regulation has different aspects to examine.

Should non-euro area countries join the single supervisory mechanism?

Highlights - Irrespective of the euro crisis, a European banking union makes sense, including for non-euro area countries, because of the extent of European Union financial integration. The Single Supervisory Mechanism (SSM) is the first element of the banking union. - From the point of view of non-euro countries, the draft SSM regulation as amended by the EU Council includes strong safeguards relating to decision-making, accountability, attention to financial stability in small countries and the applicability of national macro-prudential measures. Non-euro countries will also have the right to leave the SSM and thereby exempt themselves from a supervisory decision. - The SSM by itself cannot bring the full benefits of the banking union, but would foster financial integration, improve the supervision of cross-border banks, ensure greater consistency of supervisory practices, increase the quality of supervision, avoid competitive distortions and provide ample supervisory information. - While the decision to join the SSM is made difficult by the uncertainty about other elements of the banking union, including the possible burden sharing, we conclude that non-euro EU members should stand ready to join the SSM and be prepared for the negotiations of the other elements of the banking union.

A magyar fiatalok jellemzése pénzügyi attitűdjeik és magatartásuk mentén – Vizsgálat a felsőoktatásban tanulók pénzügyi attitűdjeiről és magatartásáról = Characterization of the Hungarian youth with their financial attitudes and behaviours – A survey about the financial behaviour and attitudes of students

A pénzügyi piacok és termékek egyre komplexebbé válnak, ami együtt jár a pénzügyeket illető információs szakadék mélyülésével is – a lakosság egyre kevésbé képes pénzügyeiről körültekintő döntéseket hozni. Jelen tanulmány a magyar felsőoktatásban tanuló fiatalokat pénzügyi attitűdjeik mentén szegmentálja és jellemzi, annak érdekében, hogy hozzájáruljon a pénzügyi kultúra szintjét növelő programok sikerességéhez, legyen az állami indíttatású (pénzügyi edukáció) vagy a versenyszféra által vezérelt. A vizsgált fiatalok alapvetően három csoportba sorolhatók: (1) Konzervatívak, (2) Lázadók és (3) Tapasztaltak. A Konzervatívakra a stabil morális értékrend, alacsony kockázatvállalási hajlandóság jellemző, céljaik között egyaránt találunk rövid és hosszú távúakat is – informáltságuk, és ebből eredően pénzügyi ismeretszintjük alacsony, a hitelekkel szembeni attitűdjük negatív. A Lázadók csoportjára az „Élj a mának!” magatartás a jellemző, vagyis rövid távú céljaik vannak, kevésbé tudatosak, pénzügyi ismeretszintjük alacsony, ugyanakkor nyitottak az újdonságokra és a kockázatvállalási szintjük magasabb a másik két csoporténál. A Tapasztaltak csoportjára a tudatosság és a pénzügyi megfontoltság a jellemző – pénzügyi ismeretszintjük magasabb a másik két csoporténál. Náluk a hosszú távú célok dominálnak, de alacsony kockázatvállalási hajlandóság mellett. _____ Financial markets and financial instruments have become more and more complex in the last decades. Unfortunately, financial literacy of population cannot keep up with the innovation activity of financial sector. By segmenting and describing Hungarian young adults along their financial attitudes, the aim of this study is to provide recommendations to the programs aiming to enhance the development of financial literacy. According to the authors’ results, 18-25 year-old young adults can be categorized as (1) conservatives, (2) rebels and (3) experienced. Conservatives can be characterized by stable moral and values, low risktaking willingness and inappropriate financial knowledge. Both short and long term goals can be explored among their preferences. Conservatives have negative attitude to bank loans. The rebels can be described by the ancient Latin saying: “Carpe Diem”. They have short-term goals and the future financial stability is not an issue for them – their financial literacy is low. However, rebels are open-minded and their risk-taking willingness is greater than the other two group members. Despite of the low level of risk-taking willingness, the highest level of financial literacy is showed by the experienced group. They have long-term goals and are able to receive information about complex financial instruments.

Post Crisis Lessons for Open Economies: Are They All New?

This paper will argue that the American economy could and will absorb the recent shocks, and that in the longer run (within a matter of years), it will somehow convert the revealed weaknesses to its advantage. America has a long record of learning from its excesses to improve the working of its particular brand of capitalism, dating back to the imposition of antitrust controls on the robber barons in the late 1800s and the enhancement of investor protection after the 1929 crash. The American economy has experienced market imperfections of all kinds but it almost always has found, true, not perfect, but fairly reliable regulatory answers and has managed to adapt to change, (e. g. Dodd-Frank Act on financial stability). The U.S. has many times pioneered in the elaboration of both theoretical and policy oriented solutions for conflicts between markets and government to increase economic welfare (Bernanke, 2008, p. 425). There is no single reason why it should not turn the latest financial calamities to its advantage. At the same time, to regain confidence in capitalism as a global system, global efforts are indispensable. To identify some of the global economic conflicts that have a lot to do with U.S. markets in particular, we seek answers to global systemic questions.

The European Patterns of "Homo Academicus“ and The Chances of Its Evolution In Current Hungarian Higher Education

In the recent four or five years, there have been abrupt and radical changes in the governance of Hungarian higher education. It can then be interesting to assess the state of “homo academicus“ as it looks currently in Hungary. The notion of “homo academicus“ is obvious: it concerns participants in the system of a country’s higher education. The paper as follows still comes back to the definition of “homo academicus“ by referring first to it as occupation, or rather as a profession that can be interpreted in terms of sociology. Secondly, some historic patterns can also be mobilised, based on the assumption that university is a very European institutions that is even rooted in the tradition of the Middle Ages. The elbow-room of seeking for identity and the role to be filled by academics are limited by the effective system of the governance of higher education. It is a key to the chances of academics of meeting the historically corroborated professional standards that they exercise academic freedom. As it cannot be done individually, but in cooperation (through a collegial system), academic freedom is always combined with collective action. The field where this freedom can be exercised can be specified through university autonomy, the lack of which makes a serious barrier to the full development of a character of “homo academicus“. This is now the case in Hungary, the paper suggests. The paper seeks to gain deeper understanding of the character of academics, their vocation and professional roles, and the governance of higher education, serving as the environment for academic activity, by creating a conceptual framework. The paper is established on the results of sociological research and the experience of legal management, although it remains to be of theoretical nature. It criticises the current Hungarian situation of the governance of higher education, arguing for the reconstruction of university autonomy and financial stability. It also emphasises the importance of predictable regulations.

Az átalakuló globális pénzügyi szabályozórendszer kérdései = Dilemmas of the changing global financial regulation system

Erősődő igény van a jelenlegi sokoldalú nemzetközi felügyeleti rendszer reformjára úgy, hogy az a nemzeti gazdaságpolitikák nemzetközi hatásait is figyelembe vegye. Ehhez át kell reformálni a jelenlegi globális pénzügyi szabályozási rendszert, de ki kell alakítani a nemzeti gazdaságpolitikák egymásra hatásának koordinációját is. Ide tartozik a globális külső sokkok csillapítására szolgáló anti-ciklikus finanszírozás, a nemzetközi adózási együttműködés fokozása, a nemzetközi adósságfinanszírozás tökéletesítése, vagy a globális fizetésieszköz-tartalékok és a fizetési rendszer viszonya. Ez utóbbi területen az SDR kiterjedtebb használatának feltételeit kell kimunkálni. A jelenlegi globális intézmények – WTO, Nemzetközi Valutaalap, Világbank – alapos megújítása elkerülhetetlen. A globális gazdasági koordináció intézményi kereteinek kidolgozása viszont még várat magára. A G20-ak csoportja – bár fontos reformokat kezdeményezett –, nem tekinthető a világgazdasági egyensúlytalanságok megoldása letéteményesének. A cél csak olyan globális intézményi struktúra lehet, amely egyaránt képes a világ nagy számú gazdaságai közötti koordinációs feladatok megoldására, s a döntések végrehajtásának kikényszerítésére. / === / The present multilateral international surveillance system needs to be reformed with an eye on international repercussions of national economic policies. The present global financial architecture, the coordination of interplays of national economic policies must be modified. An anti-cyclical financing capable of absorbing global external shocks, strengthening of international tax cooperation, improving international debt financing or the relations between global financial reserves and the global payment system might be part and parcel of this process. A more extended use of SDR could be worked out. Reforms of the present global institutions – the WTO, the IMF, the World Bank – cannot be avoided any further. Institutional frameworks of global economic coordination mechanism have still not been worked out. The Group of 20 (G-20) cannot be seen as the sole player in fighting world economic disequlibria. A global institutional system is envisaged, which is able to implement economic coordination among national economic units and to enforce the implementation of decisions taken. At present there is no global institution dealing with coherence and consistency of global issues. Reforming present institutions and/or designing new ones are possible options. The basis for such an international coordination must involve general acceptance of principles, transparent implementation, and enforcement of decisions taken.

A számviteli érdekhordozói elméletek evolúciója és a szabályozás – klasszikus tézisek és új irányok a pénzügyi beszámolásban (Evolution of the financial accounting stakeholder theories and the regulation – classic theses and new ways in the financial report)

A modernkori számvitel egyik alapvető kérdése, hogy a pénzügyi beszámolás címzettjét – az érdekhordozókat – miként lehet azonosítani. Ez a törekvés már a klasszikus, azóta meghaladottá vált elméletekben is központi szerepet töltött be és modern, posztmodern elméletekben kulcsfontosságúvá vált. A tapasztalatok alapján az azonosított érdekhordozók köre módosult, bővült. Ennek a fejlődésnek a vizsgálata során a számvitel számos olyan ismérvét sikerült azonosítani, amely segítségével a vonatkozó szabályok tökéletesíthetők. Emellett az evolúció vizsgálata segítségével közvetlenül is megfigyelhetővé vált az, hogy a számvitelt extern módon szabályozó hatalom szükségessége milyen feltételek teljesítése mellett igazolható. A vizsgálat során azonosíthatóvá váltak olyan helyzetek, amikor a számviteli szabályozó és „kívülről irányított” pénzügyi beszámolás szuboptimális helyzethez vezet. A cikk az érdekhordozói elméletek fejlődését a klasszikus felfogásoktól indulva mutatja be. Feltárja, hogy a modern – jelenleg elfogadott – koalíciós vállalatfelfogás miben hozott újat, elsősorban miként hívta életre az extern szabályozót. _____ One of the key problems of the modern financial accounting is how to define the stakeholders. This problem was already a key issue in the already outdated classical stakeholder theories. Research and experience noted that the group of stakeholders has widened and has been modified. Through this evolution researchers identified many characteristics of financial reporting through which the regulation could have been improved. This advance pointed out which are the situations when the existence of an extern accounting regulator may be justified, since under given circumstances this existence led to suboptimal scenario. This paper deals with the stakeholder theories, starting with the classical ones. The article points out how did the currently accepted theory changed the assertions of the previous one and how was the external regulator created as an inevitable consequence. The paper also highlights the main issues raised by the post-modern theories; those, which try to fit the current questions into the current stakeholder models. The article also produces a Hungarian evidence for the previously mentioned suboptimal scenario, where the not tax-driven regulation proves to be suboptimal.

A Tale of Three Countries: Recovery after Banking Crises

Highlights: • Iceland, Ireland and Latvia experienced similar developments before the crisis, such as sharp increases in banks’ balance sheets and the expansion of the construction sector. However the impact of the crisis was different: Latvia was hit harder than any other country in the world. Ireland also suffered heavily, while Iceland came out from the crisis with the smallest fall in employment, despite the greatest shock to the financial system. • There were marked differences in policy mix: currency collapse in Iceland but not in Latvia, letting banks fail in Iceland but not in Ireland, and the introduction of strict capital controls only in Iceland. The speed of fiscal consolidation was fastest in Latvia and slowest in Ireland. • Economic recovery has started in all three countries and there are several encouraging signals. The programme targets in terms of fiscal adjustment, structural reforms and financial reform are on track in all three countries. • Iceland seems to have the right policy mix. • Internal devaluation in Ireland and Latvia through wage cuts did not work, because privatesector wages hardly changed. The productivity increase was significant in Ireland and moderate in Latvia, yet was the result of a greater fall in employment than the fall in output, with harmful social consequences. • The experience with the collapse of the gigantic Icelandic banking system suggests that letting banks fail when they had a faulty business model is the right choice. • There is a strong case for a European banking federation.

Rules-based economic governance in the European Union: A reappraisal of national fiscal rules.

The economic and financial crisis of 2007/2009 has posed unexpected challenges on both the global and the regional level. Besides the US, the EU has been the most severely hit by the current economic crisis. The financial and banking crisis on the one hand and the sovereign debt crisis on the other hand have clearly shown that without a bold, constructive and systematic change of the economic governance structure of the Union, not just the sustainability of the monetary zone but also the viability of the whole European integration process can be seriously undermined. The current crisis is, however, only a symptom, which made all those contradictions overt that were already heavily embedded in the system. Right from the very beginning, the deficit and the debt rules of the Maastricht Treaty and the Stability and Growth Pact have proved to be controversial cornerstones in the fiscal governance framework of the European Economic and Monetary Union (EMU). Yet, member states of the EU (both within and outside of the EMU) have shown an immense interest in adopting numerical constraints on the domestic level without hesitation. The main argument for the introduction of national fiscal rules was mostly to strengthen the accountability and credibility of national fiscal policy-making. The paper, however, claims that a relatively large portion of national rules were adopted only after the start of deceleration of the debt-to-GDP ratios. Accordingly, national rules were hardly the sole triggering factors of maintaining fiscal discipline; rather, they served as the key elements of a comprehensive reform package of public budgeting. It can be safely argued, therefore, that countries decide to adopt fiscal rules because they want to explicitly signal their strong commitment to fiscal discipline. In other words, it is not fiscal rules per se what matter in delivering fiscal stability but a strong political commitment.

An examination of the relationship of governance structure and performance: Evidence from banking companies in Bangladesh

Corporate governance has become increasingly important in developed and developing countries just after a series of corporate scandals and failures in a number of countries. Corporate governance structure is often viewed as a means of corporate success despite prior studies reveal mixed, somewhere conflicting and ambiguous, and somewhere no relationship between governance structure and performance. This study empirically investigates the relationship between corporate governance mechanisms and financial performance of listed banking companies in Bangladesh by using two multiple regression models. The study reveals that a good number of companies do not comply with the regulatory requirements indicating remarkable shortfall in corporate governance practice. The companies are run by the professional managers having no duality and no ownership interest for which they are compensated by high remuneration to curb agency conflict. Apart from some inconsistent relationship between some corporate variables, the corporate governance mechanisms do not appear to have significant relationship with financial performances. The findings reveal an insignificant negative impact or somewhere no impact of independent directors and non-independent non-executive directors on the level of performance that strongly support the concept that the managers are essentially worthy of trust and earn returns for the owners as claimed by stewardship theory. The study provides support for the view that while much emphasis on corporate governance mechanisms is necessary to safeguard the interest of stakeholders; corporate governance on its own, as a set of codes or standards for corporate conformance, cannot make a company successful. Companies need to balance corporate governance mechanisms with performance by adopting strategic decision and risk management with the efficient utilization of the organization’s resources.

The transition times of the banking system in South-eastern Europe

The paper analyses the commercial banking sector's development in southeastern Europe during the transition period. The transition of the banking sector evolved - or is still evolving - parallel with the general economic transition. However, due to its complexity and the widespread factors that influence its activity, its development was a slow and gradual process with occasional systemic meltdowns. The paper proves that despite the different legacies, initial condition, applied economic policies, and historical events, the banking sector's structure became similar in all country cases by the end of the transition period. This similarity could be explained by the mutual challenges and the financial globalisation.

Banking Contagion under Different Exchange Rate Regimes in CEE

The global crisis of 2008 caused both liquidity shortage and increasing insolvency in the banking system. The study focuses on credit default contagion in the Central and Eastern European (CEE) region, which originated in bank runs generated by non-performing loans granted to non-financial clients. In terms of methodology, the paper relies on one hand on review of the literature, and on the other hand on a data survey with comparative and regression analysis. To uncover credit default contagion, the research focuses on the combined impact of foreign exchange rates and foreign private indebtedness.

Banking Contagion under Different Exchange Rate Regimes in CEE

The global crisis of 2008 caused both liquidity shortage and increasing insolvency in the banking system. The study focuses on credit default contagion in the Central and Eastern European (CEE) region, which originated in bank runs generated by non-performing loans granted to non-financial clients. In terms of methodology, the paper relies on one hand on review of the literature, and on the other hand on a data survey with comparative and regression analysis. To uncover credit default contagion, the research focuses on the combined impact of foreign exchange rates and foreign private indebtedness.

A fenntartható fejlődés elvei és azok érvényre jutása a banki gyakorlatban II. rész (The principles of sustainable development and their realization in the banking practice II. part)

Az utóbbi évtizedben a környezettudatos gazdálkodás szerepének felértékelődése új tevékenységi területet nyitott meg a bankok előtt, amit nemzetközi szóhasználattal élve green banking-nek neveznek. A fenntartható fejlődést támogató projektek banki finanszírozása számos lehetőséget nyit a pénzügyi intézmények számára – hírnév, új ügyfélbázis, kockázatcsökkentés, jövedelmezőség növelése –, amennyiben a bankok a fenntarthatóság elveit megfelelően integrálják működési stratégiájukba. A cikksorozat második részében a szerzők a bankok fenntartható működését támogató külső és belső motiváló tényezőit veszik vizsgálat alá, amelyet már nemzetközi elvek és megállapodások is szabályoznak és támogatnak. Kiemelt fontosságot tulajdonítanak a környezettudatos gazdálkodás banki stratégiába történő integrálásának, melynek alapjait teremthetik meg a cikkben vizsgált nemzetközi irányelvek. ________ In the last decade, a lot of publications came to light, dealing with the social and environmental responsibility of financial institutions. Banks are expected to improve their competitive advantage by demonstrating economic development, while promoting environment care and social responsibility. This sustainable finance means to manage environmental and social risks in corporate lending and project financing. Green financial institutions have developed a wide range of innovations that can support sustainable development. This article highlights a few external and internal factor that support this aim, and which are regulated by international principles. However the authors’ survey shows that in the relevant literature there are a lot of ways to define sustainability and its achievement. They suggest that all of them can be interpreted associated with green banking operation. The goal of this paper is to identify the role of financial institutions in achieving sustainable development, and stress its strategic importance. The authors also attempt to show, why and how can this sector become the promoter of sustainability.