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Lessons from Bank Privatization in Central Europe

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  • John Bonin
  • Paul Wachtel
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    Abstract

    In the three fast track, Central European transition countries, Hungary, Poland and the Czech Republic, bank restructuring and privatization involved different approaches and met with a variety of outcomes. Hence, these experiences in otherwise similar transition economies provide important lessons for bank privatization in other transition countries and in developing economies. If an independent market-oriented banking sector is the overriding goal, three fundamental conclusions emerge. First, bank restructuring and privatization must be sequenced carefully to create the appropriate incentives for lending on a commercial basis only in the future. Second, privatization requires a credible transfer of proper corporate culture is most easily established by attracting a strategic investor, preferably a foreign financial institution.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp245.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 245.

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    Length: pages
    Date of creation: 01 May 1999
    Date of revision:
    Handle: RePEc:wdi:papers:1999-245

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    Related research

    Keywords: bank privatization; bad loans; bank restructuring; financial sector reform; transition economies;

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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. Guisan, Maria-Carmen & Aguayo, Eva & Carballas, David, 2004. "Economic Growth and Cycles in Poland, Hungary, Czech Republic, Slovakia and Slovenia: A comparison with Spain, Austria and other EU countries, 1950-2002," Economic Development 79, University of Santiago de Compostela. Faculty of Economics and Business. Econometrics..
    3. Bonin, John & Wachtel, Paul, 2002. "Financial sector development in transition economies: Lessons from the first decade," BOFIT Discussion Papers 9/2002, Bank of Finland, Institute for Economies in Transition.

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