IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Banking reform and development in transition economies

  • Steven Fries

    (European Bank of Reconstruction and Development)

  • Anita Taci


    (European Bank of Reconstruction and Development)

Registered author(s):

    While development of sound, market-oriented banking systems is fundamental to the transition, bank intermediation remains stunted after a decade or more of reform. This paper examines the impact of banking and enterprise reforms and other factors on banking development in transition economies at both the aggregate level and that of individual banks. A unique contribution of the paper is the analysis of a new panel data set of 515 banks in 16 transition economies for the years 1994-99. The analyses show that progress in banking reform is the sine qua non of banking development. However, even where banking reforms have advanced, the real expansion of bank loans has failed to keep pace with output growth. There is significant evidence that privatised banks and those with higher capital-asset ratios are expanding more rapidly than state-owned banks and ab initio private banks. While foreignmajority ownership of a bank is associated with neither stronger nor weaker real growth in its customer loans, a greater presence of foreign banks in a banking system has a positive spillover effect in spurring the real expansion of loans. These results contrast with evidence from the transition economies of relatively strong growth performance by ab initio private and foreign-owned enterprises in the non-financial sectors. Taken together, the findings point to the need for policies that can strengthen supply response of banks to progress in banking and enterprise reforms. These measures include the more effective regulation of the entry and exit of banks, removal of obstacles to the expansion of foreign-owned banks and the transfer of technology and banking skills that expand access to finance, particularly by small and medium-sized enterprises.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 71.

    in new window

    Length: 24 pages
    Date of creation: Jun 2002
    Date of revision:
    Handle: RePEc:ebd:wpaper:71
    Contact details of provider: Postal: One Exchange Square, London EC2A 2JN
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ebd:wpaper:71. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Olga Lucas)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.