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The Role of Foreign Banks in Five Central and Eastern European Countries


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  • Katalin Mérõ

    (Magyar Nemzeti Bank)

  • Marianna Endrész Valentinyi

    (Magyar Nemzeti Bank)


During the last decade the development of the banking sectors in CEC5 countries was greatly determined by increasing presence of foreign banks. Foreign banks played a significant role in privatising, re-capitalising and modernising the banking sectors in the region. In this sense they contributed to stability. However the exceptionally high level of foreign ownership also raised concerns whether foreign banks threaten stability by propagating shocks outside the host country, doing cherry-picking or putting too much pressure on already troubled domestic banks. This paper summarises the empirical evidence on those issues. Our major contribution is the presentation of CEC5 countries’ experiences based on the up-to-date and rich information provided by individual case studies of the involved central banks. We outline the motives behind the entry of foreign banks, compare their performance relative to their domestic peers. By summarising the latest development in EU countries, we also highlight the differences between them and the accession CEC5 countries.

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Bibliographic Info

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2003/10.

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Length: 48 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:mnb:wpaper:2003/10

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Keywords: banks; foreign ownership.;

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Cited by:
  1. Abel, Istvan & Siklos, Pierre L., 2004. "Secrets to the successful Hungarian bank privatization: the benefits of foreign ownership through strategic partnerships," Economic Systems, Elsevier, vol. 28(2), pages 111-123, June.
  2. Renzo Orsi & Katarzyna Zukrowska, 2004. "Policy Advice: Markets and Policies," Eastward Enlargement of the Euro-zone Working Papers wp20, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Feb 2004.


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