Banking Reform

Abstract

Under the active ‘guidance’ of the IMF and the World Bank, far-reaching banking reforms have been implemented in several dozens of countries during the postwar era. These were not seldom part and parcel of broader structural adjustment programmes. However, the banking reforms have often not had the declared impact of improving social welfare, but instead produced adverse results. Przeworski and Vreeland (2000) found that the effect of participation in IMF programmes is to lower growth rates for as long as countries remain under a programme. Furthermore, the fact that banking crises have often recurred even in countries that have implemented IMF-guided banking reforms indicates that these reforms failed to address some fundamental problems with the operation of the banking system. It is thus necessary to re-examine the topic of banking reform in the light of our approach.