Privatizing a Banking System: A Case Study of Hungary
Corvinus University of Budapest
Pierre L. Siklos
Wilfrid Laurier University - School of Business & Economics
This paper reviews and assesses the privatization of the banking sector in Hungary. Most of the important developments took place in the period between 1995-98. Nevertheless, the choices made by Hungarian policy makers reflect both internal constraints stemming from the weakneses of the financial system as well as external macroeconomic shocks. Hungary chose a path that has led to a relatively large degree of foreign ownership in the banking sector, at least by the standards of most developed countries. While there is a growing literature on the question of foreign ownership of a nation's banking sector there has been relatively little thought given to the manner in which ownership should be allowed to proceed. The Hungarian experience is especially interesting in this regard since policy makers chose not to follow some of the recommendations made by several western financial insitutions. Instead, the vehicle that led to foreign owenership was through the search for strategic partners. Under certain conditions, this approach has much to be recommended for emerging market economies.
Number of Pages in PDF File: 32
Keywords: privatization Hungary strategic partners foreign ownership banking
JEL Classification: P51, G28, G21working papers series
Date posted: October 12, 2001
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