Lessons from Bank Privatization in Central Europe

John Bonin and Paul Wachtel

No 245, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

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.

Keywords: bank privatization; bad loans; bank restructuring; financial sector reform; transition economies (search for similar items in EconPapers)
JEL-codes: G21 P34 P52 (search for similar items in EconPapers)
Pages: pages
Date: 1999-05-01
New Economics Papers: this item is included in nep-cwa, nep-eec and nep-tra
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Citations: View citations in EconPapers (8)

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