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How Important are Foreign Banks in the Financial Development of European Transition Countries?

  • Ilko Naaborg

    (University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands,

  • Bert Scholtens

    (University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands)

  • Jakob de Haan

    (University of Groningen, Groningen, The Netherlands, and CESifo, Munich, Germany)

  • Hanneke Bol

    (University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands)

  • Ralph de Haas

    (The Netherlands Bank, Amsterdam, The Netherlands)

This article analyses the development of the banking sector in European transition countries. We find that, although bank assets increased during the 1990s, credit to the private sector remained relatively low. Foreign-owned banks have become major players in the financial system of these countries. However, foreign bank presence and financial development in general vary considerably among the transition economies. Foreign-owned banks have, in general, higher profitability levels than domestic banks. Furthermore, it appears that foreign and domestic bank performance tend to converge.

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Article provided by Institute for Financial Management and Research in its journal Journal of Emerging Market Finance.

Volume (Year): 3 (2004)
Issue (Month): 2 (August)
Pages: 99-123

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Handle: RePEc:sae:emffin:v:3:y:2004:i:2:p:99-123
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