The Present Situation of the Banking Sector in the Transition Countries

Abstract

The central European transition countries were surprisingly fast in implementing the reform of the finance sector — one of the basic conditions for a modern monetary sector. With the central banks divesting themselves of their commercial bank operations, the previous single-tier system was transformed into a two-tier banking system. The savings banks were left untouched by the process and continue to offer their services. In the wake of the separation of commercial business from the central banks, all the transition countries established the “large”, initially state-owned banks. With the aim of promoting competition within the banking system from the very beginning, the authorities also chartered private banks. Especially the admission of foreign private banks was meant to further competition and to help introduce the know-how required in this sector more rapidly. This policy gave rise to a veritable boom of new bank establishments in the central and eastern European transition countries (WYCZANSKI, 1993).