Transition Banking assesses the efforts since 1989 to develop financial sectors in the economies of Central and Eastern Europe. In finance above all, the principles of central planning were radically opposed to those of capitalism, and moving from one system to the other has required entirelynew institutions and skills. This financial development is crucial to growth and to full partnership with the West.The approach taken here is comprehensive, empirical, and comparative. Anderson and Kegels seek to answer a series of key questions:* Has the State retreated from controlling the allocation of savings?* Is the banking sector competitive?* Do investors direct the use of capital?* Are securities markets developing?* Is outside finance supporting economic growth?* Is the financial system stable?In explaining the logic of finance in a transition setting, Transition Banking both documents the important progress made in institution-building to date and pinpoints the areas where the region remains vulnerable.

1 Financial Development of Post-Socialist Economies: The Main Issues

1

(30)

1.1. The Scope of Financial Transition

1

(5)

1.2. Financial Aspects of Stabilization in Transition

6

(3)

1.3. Financial Liberalization

9

(5)

1.4. Deep Institution Building: Establishing Property Rights

14

(4)

1.5. Deep Institution Building: Discipline in Financial Contracting

18

(2)

1.6. Deep Institution Building: Cleaning up Bad Loans

20

(3)

1.7. Deep Institution Building: Banks or Securities Markets?

23

(3)

1.8. The Speed of Transition and the Sequencing of Reform

26

(4)

1.9. Conclusion

30

(1)

2 The Domestic Economic Context of Financial Transition

31

(22)

2.1. Introduction

31

(1)

2.2. The Point of Departure

32

(2)

2.3. Summary of Political Developments

34

(3)

2.4. Liberalization and Stabilization

37

(9)

2.5. Macro-trends in Transition

46

(5)

2.6. Conclusion

51

(2)

3 The International Setting

53

(21)

3.1. International Economic Relations under Communism

53

(1)

3.2. Trade Reorientation since 1989

54

(5)

3.3. External Debt

59

(6)

3.4. Relations with Multinational Financial Institutions

65

(4)

3.5. Exchange Rates and Capital Flows

69

(4)

3.6. Conclusion

73

(1)

4 Hungary

74

(57)

4.1. Introduction

74

(1)

4.2. The Organization of Banking

75

(6)

4.3. Instruments of Monetary Control and Monetary Policy

81

(8)

4.4. Credit Allocation

89

(7)

4.5. Bank Supervision and Deposit Insurance

96

(2)

4.6. Bad Loans and Bank Recapitalization

98

(10)

4.7. Enterprise Restructuring and the Treatment of Financial Distress

108

(3)

4.8. Privatization

111

(10)

4.9. Role of Banks in Enterprise Restructuring

121

(4)

4.10. Financial Market Development

125

(3)

4.11. Evaluation

128

(3)

5 Poland

131

(44)

5.1. Introduction

131

(2)

5.2. The Organization of the Banking Sector

133

(6)

5.3. Money Markets and Monetary Policy

139

(12)

5.4. Deposit Guarantees

151

(1)

5.5. Enterprise Restructuring and Financial Distress

152

(9)

5.6. Bank Recapitalization and the Bad-Debt Problem

161

(6)

5.7. Financial Market Development

167

(3)

5.8. Assessment

170

(5)

6 The Czech Republic

175

(50)

6.1. Introduction

175

(2)

6.2. The Structure of the Banking Sector

177

(4)

6.3. Patterns of Credit

181

(4)

6.4. Monetary Policy and the Money Market

185

(4)

6.5. Bank Regulation and Deposit Insurance

189

(2)

6.6. Enterprise Restructuring and the Financial Sector

191

(1)

6.7. Privatization

192

(7)

6.8. Resolution of Financial Distress and Bank Recapitalization

199

(9)

6.9. Financial Markets

208

(5)

6.10. Financial Monitoring and Corporate Control

213

(9)

6.11. Evaluation

222

(3)

7 Comparing Financial Transition in the Czech Republic, Hungary, and Poland

225

(33)

7.1. Introduction

225

(1)

7.2. Has the State Retreated from Controlling the Allocation of Savings?

226

(6)

7.3. Is the Banking Sector Competitive?

232

(5)

7.4. Do Investors Direct the Use of Capital?

237

(6)

7.5. Are Securities Markets Developing?

243

(3)

7.6. Is Outside Finance Supporting Economic Growth?

246

(4)

7.7. Is the Financial System Stable?

250

(4)

7.8. Conclusion

254

(4)

8 Financial Policy for Transition Countries

258

(30)

8.1. Introduction

258

(2)

8.2. Assuring Financial Safety

260

(6)

8.3. Banking Competition Policy

266

(6)

8.4. Bank Ownership Structure

272

(4)

8.5. The Organization of Securities Markets

276

(4)

8.6. Central Banking and the Money Market

280

(4)

8.7. Financial Reform and the Negotiation of Entry into the European Union

284

(4)

Epilogue

288

(3)

References

291

(8)

Index

299

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Transition Banking Financial Development of Central and Eastern Europe

9780198290131

0198290136

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