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Bank-led restructuring in Poland : an empirical look at the bank conciliation process

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  • Gray, Cheryl W.
  • Holle, Arnold
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    Abstract

    Since 1992, Poland has been considered a model of commercial banking reform among transition economies. Its Enterprise and Bank Restructuring Program (EBRP) tried to force state-owned commercial banks to build institutional capacity and to resolve problem loans through workouts, liquidation, loan sales, or pay back. The authors reviewed the process and initial outcomes of the bank-led conciliation process. A companion paper looks at experience with the other resolution paths under the EBRP. The outcome is decidedly mixed. The EBRP forced banks to confront their problems, helped them build institutional capacity, and furthered the task of weeding out and closing unviable firms. Despite these strengths, the data suggest that the bank-led conciliation process has had limited power to promote firm restructuring or privatization. The agreements themselves included few tangible requirements for operational or management change. The first two years of implementation saw a slowdown in the layoffs rate, a decline in average operating profitability, and little real privatization. The main impact of conciliation appears to have been to reduce debt service. Weaker banks tended to be more lenient, swapping more debt for equity, and had greater difficulty forecasting future enterprise performance. The EBRP was a good start, but continued work is needed to build strong banks that can impose effective corporate governance on enterprises that need to restructure.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1650.

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    Date of creation: 30 Sep 1996
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    Handle: RePEc:wbk:wbrwps:1650

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    Keywords: Financial Intermediation; Banks&Banking Reform; Payment Systems&Infrastructure; Financial Crisis Management&Restructuring; Municipal Financial Management; Banks&Banking Reform; Financial Crisis Management&Restructuring; Financial Intermediation; Municipal Financial Management; Strategic Debt Management;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Brian Pinto & Marek Belka & Stefan Krajewski, 1993. "Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 213-270.
    2. M Belka & S Estrin & M Schaffer & I.J. Singh, 1995. "Enterprise Adjustment in Poland: Evidence from a Survey of 200 Private," CEP Discussion Papers dp0233, Centre for Economic Performance, LSE.
    3. Gray, Cheryl W. & Holle, Arnold, 1996. "Bank-led restructuring in Poland : bankruptcy and its alternatives," Policy Research Working Paper Series 1651, The World Bank.
    4. Qimiao Fan & Mark E. Schaffer, 1994. "Government financial transfers and enterprise adjustments in Russia, with comparisons to Central and Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(2), pages 151-188, 06.
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    Cited by:
    1. Slomka, Agnieszka, 2005. "Have banks filled the gap? Credit as a mechanism of corporate governance in a transition country: example of Poland," MPRA Paper 642, University Library of Munich, Germany.
    2. Gray, Cheryl W. & Holle, Arnold, 1996. "Bank-led restructuring in Poland : bankruptcy and its alternatives," Policy Research Working Paper Series 1651, The World Bank.
    3. David Dornisch, 2002. "The Evolution of Post-socialist Projects: Trajectory Shift and Transitional Capacity in a Polish Region," Regional Studies, Taylor & Francis Journals, vol. 36(3), pages 307-321.
    4. Montes-Negret, Fernando & Papi, Luca, 1997. "The Polish experience with bank and enterprise restructuring," Policy Research Working Paper Series 1705, The World Bank.

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