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Banking in Transition Countries

  • John Bonin

    ()

    (Department of Economics, Wesleyan University)

  • Iftekhar Hasan

    ()

    (Fordham University, 5 Columbus Circle, 11-22, New York, NY 10019)

  • Paul Wachtel

    ()

    (Stern School of Business, New York University, New York NY 10012)

Modern banking institutions were virtually non-existent in the planned economies of central Europe and the former Soviet Union. In the early transition period, banking sectors began to develop during several years of macroeconomic decline and turbulence accompanied by repeated bank crises. However, governments in many transition countries learned from these tumultuous experiences and eventually dealt successfully with the accumulated bad loans and lack of strong bank regulation. In addition, rapid progress in bank privatization and consolidation took place in the late 1990s and early 2000s, usually with the participation of foreign banks. By the mid 2000s the banking sectors in many transition countries were dominated by foreign owners and were able to provide a wide range of services. Credit growth resumed, sometimes too rapidly, particularly in the form of lending to households. The global financial crisis put transition banking to test. Countries that had expanded credit rapidly were vulnerable to the macroeconomic shock and there was considerable concern that foreign owners would reduce their funding to transition country subsidiaries. However, the banking sectors turned out to be resilient, a strong indication of the rapid progress in institutional development and regulatory capabilities in the transition countries.

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File URL: http://repec.wesleyan.edu/pdf/jbonin/2013008_bonin.pdf
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Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2013-008.

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Length: 35 pages
Date of creation: Oct 2013
Date of revision:
Publication status: Forthcoming The Oxford Handbook of Banking 2nd edition
Handle: RePEc:wes:weswpa:2013-008
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Web page: http://www.wesleyan.edu/econ/

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  1. Ongena, S. & Peydro, J.L. & van Horen, N., 2013. "Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks," Discussion Paper 2013-040, Tilburg University, Center for Economic Research.
  2. John P. Bonin & Iftekhar Hasan & Paul Wachtel, 2004. "Privatization Matters: Bank Efficiency in Transition Countries," William Davidson Institute Working Papers Series 2004-679, William Davidson Institute at the University of Michigan.
  3. Popov, Alexander & Udell, Gregory F., 2012. "Cross-border banking, credit access, and the financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 147-161.
  4. Paul Wachtel & Iftekhar Hasan & Mingming Zhou, 2007. "Institutional Development, Financial Deepening and Economic Growth: Evidence from China," Working Papers 07-17, New York University, Leonard N. Stern School of Business, Department of Economics.
  5. Haselmann, Rainer, 2006. "Strategies of foreign banks in transition economies," Emerging Markets Review, Elsevier, vol. 7(4), pages 283-299, December.
  6. Ralph de Haas & Iman van Lelyveld, 2003. "Foreign Banks and Credit Stability in Central and Eastern Europe: A Panel Data Analysis," DNB Staff Reports (discontinued) 109, Netherlands Central Bank.
  7. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005. "Bank performance, efficiency and ownership in transition countries," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 31-53, January.
  8. Bonin, John P., 2004. "Banking in the Balkans: the structure of banking sectors in Southeast Europe," Economic Systems, Elsevier, vol. 28(2), pages 141-153, June.
  9. Abarbanell, Jeffery S. & Meyendorff, Anna, 1997. "Bank Privatization in Post-Communist Russia: The Case of Zhilsotsbank," Journal of Comparative Economics, Elsevier, vol. 25(1), pages 62-96, August.
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