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Banking in Transition Countries

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • John Bonin & Iftekhar Hasan & Paul Wachtel, 2013. "Banking in Transition Countries," Wesleyan Economics Working Papers 2013-008, Wesleyan University, Department of Economics.
  • Handle: RePEc:wes:weswpa:2013-008
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    File URL: http://repec.wesleyan.edu/pdf/jbonin/2013008_bonin.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    transition banking; bank privatization; foreign banks; bank regulation; credit growth;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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