Banking in Transition Countries

John Bonin (), Iftekhar Hasan () and Paul Wachtel
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John Bonin: Department of Economics, Wesleyan University

No 2013-008, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

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.

Keywords: transition banking; bank privatization; foreign banks; bank regulation; credit growth (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013-10
New Economics Papers: this item is included in nep-ban, nep-cis, nep-cwa, nep-his and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in The Oxford Handbook of Banking, Second Edition, Allen N. Berger, Philip Molyneux, and John O.S. Wilson (eds.), Oxford University Press, Oxford U.K., 2015, pp. 963 – 983

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Related works:
Working Paper: Banking in Transition Countries (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2013-008

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