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The Impact of Changes in Financial Supervision on the Profitability of the Hungarian Banking Sector

Author

Listed:
  • Tibor Bareith

    (Department of Investment, Finance and Accounting, Hungarian University of Agriculture and Life Sciences, Kaposvár Campus, HU7400 Kaposvár, Hungary)

  • Tibor Tatay

    (Department of Economic Analyses, Széchenyi István University, HU9026 Győr, Hungary)

  • József Varga

    (Department of Investment, Finance and Accounting, Hungarian University of Agriculture and Life Sciences, Kaposvár Campus, HU7400 Kaposvár, Hungary
    Department of Finance, Corvinus University of Budapest, HU1093 Budapest, Hungary
    Faculty of Economics, Socio-Human Sciences and Engineering, Sapientia Hungarian University of Transylvania, RO530104 Miercurea Ciuc, Romania)

Abstract

Since 2013, the central bank has been responsible for supervision in Hungary. In addition to the regulatory change, a law was published in the same year that started the process of abolishing the savings co-operative system. This paper investigates the impact of these two significant changes on the profitability of the Hungarian banking sector between 2003 and 2019 using dynamic panel model estimates. The supervisory change has reduced the profitability of credit institutions and tighter supervision has been implemented. The transformation of the savings co-operative system was in fact an integration that led to the disappearance of savings co-operatives by 2019. Competition in the market has been weakened, which has increased the profitability of the remaining financial institutions. The results were robust in terms of the multiple specifications and profitability ratio.

Suggested Citation

  • Tibor Bareith & Tibor Tatay & József Varga, 2022. "The Impact of Changes in Financial Supervision on the Profitability of the Hungarian Banking Sector," Economies, MDPI, vol. 10(7), pages 1-19, July.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:7:p:176-:d:868232
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    References listed on IDEAS

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    1. Dimitris K. Chronopoulos & Hong Liu & Fiona J. McMillan & John O.S. Wilson, 2015. "The dynamics of US bank profitability," The European Journal of Finance, Taylor & Francis Journals, vol. 21(5), pages 426-443, March.
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    4. Evrim TURGUTLU, 2014. "Dynamics of Profitability in the Turkish Banking Industry," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 14(1), pages 43-52.
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    Cited by:

    1. Zhang, Tidong & Cao, Jingsheng, 2023. "Impact of regulatory policy adjustments on insurance company costs and cost efficiency," Finance Research Letters, Elsevier, vol. 58(PD).

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