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Opening up for foreign banks: How Central and Eastern Europe can benefit


  • Cludia M. Buch


This paper analyses the role of foreign banks in the Czech Republic, Estonia, Hungary, and Poland. With respect to their planned EU membership, these countries have to consider the full implementation of free trade in financial services. Generally, liberalizing the market access of foreign banks allows the production of financial services according to comparative advantage, it fosters competition, it promotes bank privatization, and it facilitates a transfer of know-how into the emerging financial systems. The most important sequencing issue that arises is that the incumbent banks should have been recapitalized for their truly inherited bad loans before markets are opened up. In view of the reform progress that has already been made in the countries under review, abolishing remaining entry barriers is unlikely to put the stability of banking systems at risk while allowing the benefits of open markets to be exploited. Copyright The European Bank for Reconstruction and Development, 1997.

Suggested Citation

  • Cludia M. Buch, 1997. "Opening up for foreign banks: How Central and Eastern Europe can benefit," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(2), pages 339-366, November.
  • Handle: RePEc:bla:etrans:v:5:y:1997:i:2:p:339-366

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    References listed on IDEAS

    1. International Monetary Fund, 1992. "Issues in Managing and Sequencing Financial Sector Reforms Lessons From Experiences in Five Developing Countries," IMF Working Papers 92/82, International Monetary Fund.
    2. Saunders, Anthony & Walter, Ingo, 1994. "Universal Banking in the United States: What Could We Gain? What Could We Lose?," OUP Catalogue, Oxford University Press, number 9780195080698, June.
    3. Vittas, Dimitri & Neal, Craig, 1992. "Competition and efficiency in Hungarian banking," Policy Research Working Paper Series 1010, The World Bank.
    4. Kuschel, Hans-Dieter, 1992. "Die Europaabkommen der EG mit Polen, Ungarn und der CSFR," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 72(2), pages 93-100.
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    Cited by:

    1. Ilko Naaborg & Bert Scholtens & Jakob de Haan & Hanneke Bol & Ralph de Haas, 2004. "How Important are Foreign Banks in the Financial Development of European Transition Countries?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 3(2), pages 99-123, August.
    2. Cazzavillan, Guido & Olszewski, Krzysztof, 2012. "Interaction between foreign financial services and foreign direct investment in Transition Economies: An empirical analysis with focus on the manufacturing sector," Research in Economics, Elsevier, vol. 66(4), pages 305-319.
    3. Tomislav Galac & Evan Kraft, 2000. "What Has Been the Impact of Foreign Banks in Croatia?," Surveys 4, The Croatian National Bank, Croatia.
    4. Bogaard, Hein & Svejnar, Jan, 2013. "Incentive Pay and Performance: Insider Econometrics in a Multi-Unit Firm," IZA Discussion Papers 7800, Institute for the Study of Labor (IZA).
    5. Jagdish R. Raiyani, 2011. "Analysis of Operational Efficiency in Indian Banks: A Comparative Study," Journal of Commerce and Trade, Society for Advanced Management Studies, vol. 6(2), pages 80-88, October.
    6. Hanneke Bol & Jakob de Haan & Bert Scholtens & Ralph de Haas, 2002. "How Important Are Foreign Banks in European Transition Countries? A Comparative Analysis," International Finance 0209005, EconWPA.
    7. Gur Ofer, 2001. "Development and Transition: Emerging, but Merging?," Revue d'Économie Financière, Programme National Persée, vol. 6(1), pages 107-146.
    8. Tigran Poghosyan & Arsen Poghosyan, 2010. "Foreign bank entry, bank efficiency and market power in Central and Eastern European Countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(3), pages 571-598, July.
    9. 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.
    10. Parinduri, Rasyad A. & Riyanto, Yohanes E., 2012. "The Impact of the Strategic Sale of Restructured Banks: Evidence from Indonesia," World Development, Elsevier, vol. 40(3), pages 446-457.
    11. Adrian E. Tschoegl, 2004. "Financial Crises and the Presence of Foreign Banks," International Finance 0405016, EconWPA.
    12. Yu Hsing, 2005. "Effects of Macroeconomic Policies and Stock Market Performance on the Estonian Economy," Prague Economic Papers, University of Economics, Prague, vol. 2005(2), pages 109-116.
    13. Lensink, Robert & Hermes, Niels, 2004. "The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 553-568, March.
    14. R.T.A. de Haas & I. van Lelyveld, 2002. "Foreign Bank Penetration and Bank Credit Stability in Central and Eastern Europe," Research Series Supervision (discontinued) 43, Netherlands Central Bank, Directorate Supervision.
    15. Zeynep Önder & Süheyla Özyıldırım, 2016. "Foreign banks, financial crises and macroeconomic fluctuations," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(3), pages 447-479, July.
    16. Philipp Harms & Aaditya Mattoo & Ludger Schuknecht, 2003. "Explaining liberalization commitments in financial services trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 82-113, March.
    17. Gur Ofer, 2001. "Développement et transition : émergence ou convergence ?," Revue d'Économie Financière, Programme National Persée, vol. 6(1), pages 115-160.
    18. Usman Bashir & Zaheer Abbas & Muntazir Hussain, 2014. "The Effect of Foreign Bank Presence on Domestic Banks Performance: An Evidence from a Developing Economy," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 10(2), pages 36-50, April.
    19. Adnan Kasman & Kamila Mekenbayeva, 2016. "Technical Efficiency and Total Factor Productivity in the Kazakh Banking Industry," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 66(4), pages 685-709, December.
    20. Akbar, Yusaf H. & McBride, J. Brad, 2004. "Multinational enterprise strategy, foreign direct investment and economic development: the case of the Hungarian banking industry," Journal of World Business, Elsevier, vol. 39(1), pages 89-105, February.
    21. Laurent Weill, 2006. "Propriété étrangère et efficience technique des banques dans les pays en transition. Une analyse par la méthode dea," Revue économique, Presses de Sciences-Po, vol. 57(5), pages 1093-1108.
    22. Scholtens, Bert, 2000. "Financial regulation and financial system architecture in Central Europe," Journal of Banking & Finance, Elsevier, vol. 24(4), pages 525-553, April.

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