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Banking in transition countries

Author

Listed:
  • Bonin, John
  • Hasan, Iftekhar
  • Wachtel, Paul
Abstract
Modern banking institutions were virtually non-existent in the planned economies of cen-tral Europe and the former Soviet Union. In the early transition period, banking sectors be-gan to develop during several years of macroeconomic decline and turbulence accompa-nied 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 privatiza-tion and consolidation took place in the late 1990s and early 2000s, usually with the par-ticipation of foreign banks. By the mid 2000s the banking sectors in many transition coun-tries 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 con-siderable concern that foreign owners would reduce their funding to transition country sub-sidiaries. 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

  • Bonin, John & Hasan, Iftekhar & Wachtel, Paul, 2014. "Banking in transition countries," BOFIT Discussion Papers 8/2014, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2014_008
    as

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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
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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