Kager, Marianne --- "The banking system in the accession countries" [2003] ELECD 107; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Structural Challenges for Europe" (Edward Elgar Publishing, 2003)

Book Title: Structural Challenges for Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843764748

Section: Chapter 7

Section Title: The banking system in the accession countries

Author(s): Kager, Marianne

Number of pages: 12

Extract:

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. Solving the issue of non-performing loans
2. Recapitalizing the banking sector
3. Introducing appraisal and accounting standards as well as an adequate
system of supervision
4. 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 can-
didate 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 ...