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Kraft, Evan --- "Banking reform in South-East Europe: accomplishments and challenges" [2005] ELECD 397; in Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris (eds), "European Economic Integration and South-East Europe" (Edward Elgar Publishing, 2005)

Book Title: European Economic Integration and South-East Europe

Editor(s): Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845425173

Section: Chapter 22

Section Title: Banking reform in South-East Europe: accomplishments and challenges

Author(s): Kraft, Evan

Number of pages: 18

Extract:

22. Banking reform in South-East
Europe: accomplishments
and challenges
Evan Kraft1

1. INTRODUCTION

The transformation of the banking industry in transition countries has
been one of the most dramatic and far-reaching aspects of the quite dra-
matic and far-reaching process of transition. For example, while in 1995
foreign bank penetration in the former Communist countries of Central
and Eastern Europe (CEE) and South-East Europe (SEE) was minimal, by
2002 foreign banks held majority shares, and often overwhelmingly large
shares, in 13 of the 15 countries of CEE and SEE. In SEE, Albania, Bosnia
and Herzegovina, Bulgaria, Croatia and Romania had foreign majority
ownership (measured by capital), with Macedonia very close to 50 per cent
and Serbia and Montenegro somewhat behind as of end-2004.
Such a transformation from a banking system dominated by either state-
owned banks of questionable quality or newly formed and untested private
banks, to one dominated generally by reputable (but by no means first-tier
quality) EU banks would have been difficult to imagine ten years ago,
particularly in some of the poorer and politically less stable SEE countries.
The transformation of the banking industry has turned one of the most
vulnerable and unstable parts of the economies of the transition countries
into one of the most advanced sectors, one which at times seems so far
ahead of other sectors as to cause certain problems.
Nonetheless, policy makers and regulators continue to face important,
if somewhat less daunting challenges in SEE countries. ...


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