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Lessons from Bank Privatization in Central Europe

Author

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  • John Bonin
  • Paul Wachtel

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.

Suggested Citation

  • John Bonin & Paul Wachtel, 1999. "Lessons from Bank Privatization in Central Europe," William Davidson Institute Working Papers Series 245, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:1999-245
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39631/3/wp245.pdf
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    Cited by:

    1. repec:wsi:rpbfmp:v:06:y:2003:i:04:n:s021909150300116x is not listed on IDEAS
    2. 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.
    3. Janusz J. Tomidajewicz, 2015. "The scope and nature of privatisation in the financial sector," Working papers wpaper97, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    4. 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..

    More about this item

    Keywords

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

    JEL classification:

    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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