Eastern Europe's experience with banking reform: Is there a role for banks in the transition?

Abstract

How have Eastern European countries dealt with their banking system problems? Are there any lessons to be learnt? What role have countries assigned to banks in the transition and in dealing with the enterprise problem? This paper addresses some of these questions by analyzing the experiences of Hungary, Poland, the former CSFR, Bulgaria and Romania. While most countries have made substantial progress in restructuring their banking systems, few have used their banking system as an instrument to stimulate their supply response by ensuring an efficient allocation of credit. Countries that have encouraged the establishment of new private banks, introduced new regulation and supervision, and enhanced bank competition show an improvement in the allocation of credit and greater control of loss-making enterprises. © 1993.