Banking in Transition Countries

34 Pages Posted: 26 Aug 2008

See all articles by John Bonin

John Bonin

Wesleyan University - Economics Department

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Paul Wachtel

New York University - Stern School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 25, 2008


Modern banking institutions were virtually non-existent in the planned economies of central Europe and the former Soviet Union. In the early transition period, banking sectors began to develop during several years of macroeconomic decline and turbulence accompanied by repeated bank crises. However, governments in many transition countries learned from these tumultuous experiences and eventually dealt successfully with the accumulated bad loans and lack of strong bank regulation. In addition, rapid progress in bank privatization and consolidation took place in the late 1990s and early 2000s, usually with the participation of foreign banks. By 2005, the banking sectors in many transition countries had developed sufficiently to provide a wide range of services with solid bank performance. Recently, banks have switched their focus from lending to enterprises in a somewhat underdeveloped institutional environment to new collateralized lending to households, which accounts for much of the recent growth of credit in many transition countries.

Keywords: transition banking, bank privatization, foreign banks, bank regulation, credit growth

JEL Classification: G21, P30, P34, P52

Suggested Citation

Bonin, John P. and Hasan, Iftekhar and Wachtel, Paul, Banking in Transition Countries (July 25, 2008). BOFIT Discussion Paper No. 12/2008, Available at SSRN: or

John P. Bonin

Wesleyan University - Economics Department ( email )

Middletown, CT 06459
United States
203-685-2000 (Phone)

Iftekhar Hasan (Contact Author)

Fordham University ( email )

NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006

Paul Wachtel

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)


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