1. South East Europe in an Environment of Volatile Capital Flows Sarajevo, June 5 and 6, 2014 Michael Faulend e-mail: michael.faulend@hnb.hr

2. What external debt data tell us about deleveraging in SEE? Source: Eurostat, national central banks, World Bank

3. Large portion of affiliated external debt – mitigates capital flows’ volatility risks, but … Source: Spring 2014 Regional Economic Issues report - CESEE External Funding Patterns and Risks

4. Croatia – capital inflows’ slow down after the global financial crisis Source: HNB

5. Countercyclical monetary and macroprudential policy can help …

6. Bank (regulatory) capital adequacy ratio (CAR) * refers to the latest data available for 2013. Source: IMF, FSI, (bank assets) weighted averages. Note: CEE countries: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia. … promote banks’ stability and support credit activity, but only if it was enacted early enough (in the cycle)

7. Cummulative change in corporate credit in % (8/2008 – 3/2014) Note: EU15 = Finland, Ireland, Sweeden, UK (North); Austria, Belgium, France, Germany, Netherlands (Continental); Greece, Italy, Portugal, Spain (South). EU12 = Estonia, Latvia (North); Czech Rep., Hungary, Poland, Slovak Rep., Slovenia (Continental), Bulgaria, Romania (South). Source: ECB and national central banks EU 15 North Croatia: Banks’ interest rates Source: HNB Conclusion – the highest cummulative credit growth to corporate sector since the start of the crisis (among EU countries)

8. Thank You! 8