Chapter 6: Foreign direct investment – the impact of foreign banks in Central and Eastern Europe
Herbert Stepic My approach towards the subject of foreign direct investment (FDI) and the impact of foreign banks in Central and Eastern Europe (CEE) is an empirical one. Drawing on RZB’s (Raiffeisen Zentralbank Österreich) experiences, I aim to provide an overview of the region’s economic development and an assessment of the role that FDI in general and that FDI by foreign-owned banks in particular has played in the process. It is obvious that the political and economic transformation from centrally steered to market economies and imminent partners in an enlarged EU was dramatic in every sense of the word, and the contributions rendered by foreign ﬁnancial sectors were and continue to be crucially important. Both the region itself as well as its neighbouring countries beneﬁt from the economic perspectives and opportunities of these totally redesigned markets. In my opinion, ﬁnancial intermediation and structural changes are strongly interconnected. Financial intermediation had a very strong eﬀect on the catching-up process. Looking back to 1986, when RZB made its ﬁrst – at that time revolutionary – step into the Hungarian market, the Eastern European banking landscape could be portrayed as one with practically no competition, coupled with a complete lack of customer orientation, a low degree of management know-how, insuﬃcient technical equipment, a very poorly developed loan culture and risk awareness and last, but not least, widespread corruption at all levels of the economy and government. Throughout the region, structural changes were mainly driven by the individual government’s attitude regarding privatization, and...
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