Chapter 7: The banking system in the accession countries
Marianne Kager 1. INTRODUCTION The transformation of the centrally planned command economies into Western-style market economies required comprehensive reforms within the ﬁnancial sectors of the countries in Central and Eastern Europe (CEE). The foremost objective in the early years of reform was the conversion of the single-tier banking system into a two-tier banking system, in which ﬁnancial institutions can fulﬁl their central task of ‘supplying, allocating and monitoring ﬁnancial funds for investment’ (James Tobin). The creation of a functioning banking sector required four general problem areas to be addressed: 1. 2. 3. 4. Solving the issue of non-performing loans Recapitalizing the banking sector Introducing appraisal and accounting standards as well as an adequate system of supervision Privatizing the banking sector An ex-post analysis indicates that the success of restructuring the banking sector in individual countries, as well as the overall economic costs of this restructuring, depended largely on the order in which the above problems were solved. Restructuring costs in the banking sector varied from country to country, and ranged from 6 per cent to 30 per cent of an annual average GDP (see Table 7.1). Despite the diﬃculties and setbacks which have been encountered by eﬀorts at banking reform in the EU candidate countries since 1990, eﬀorts to reform the banking system and to resolve the banking crises in these countries have generally met with success. 91 92 Financial sector development Table 7.1 Restructuring costs in the banking sector (in per cent of GDP) (1991...
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