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Opening up for foreign banks: How Central and Eastern Europe can benefit1

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  • Cludia M. Buch

Abstract

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.

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  • Cludia M. Buch, 1997. "Opening up for foreign banks: How Central and Eastern Europe can benefit1," 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
    DOI: 10.1111/j.1468-0351.1997.tb00021.x
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    5. Bernhard Fischer & Helmut Reisen, 1993. "Financial opening in developing countries," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 28(1), pages 44-48, January.
    6. World Bank, 1996. "Global Economic Prospects and the Developing Countries 1996," World Bank Publications - Books, The World Bank Group, number 32391, December.
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