Banking in transition countries
AbstractModern banking institutions were virtually non-existent in the planned economies of central Europe and the former Soviet Union. In the early transition period, banking sectors began to develop during several years of macroeconomic decline and turbulence accompanied by repeated bank crises. However, governments in many transition countries learned from these tumultuous experiences and eventually dealt successfully with the accumulated bad loans and lack of strong bank regulation. In addition, rapid progress in bank privatization and consolidation took place in the late 1990s and early 2000s, usually with the participation of foreign banks. By the mid 2000s the banking sectors in many transition countries were dominated by foreign owners and were able to provide a wide range of services. Credit growth resumed, sometimes too rapidly, particularly in the form of lending to households. The global financial crisis put transition banking to test. Countries that had expanded credit rapidly were vulnerable to the macroeconomic shock and there was considerable concern that foreign owners would reduce their funding to transition country subsidiaries. However, the banking sectors turned out to be resilient, a strong indication of the rapid progress in institutional development and regulatory capabilities in the transition countries.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 8/2014.
Length: 34 pages
Date of creation: 18 Mar 2014
Date of revision:
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More information through EDIRC
transition banking; bank privatization; foreign banks; bank regulation; credit growth;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
- P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-11 (All new papers)
- NEP-BAN-2014-04-11 (Banking)
- NEP-GER-2014-04-11 (German Papers)
- NEP-TRA-2014-04-11 (Transition Economics)
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