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The Development of the Hungarian Banking Sector Prior to Basel II

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  • Csizmazia, Roland Attila

Abstract

Although the economic transition started in the early of 1990s, Hungary had a pioneer role in introducing the two-tier banking system within the former Soviet Eastern Block. The modernization of the banking system was unexpectedly far-reaching as Western banks were allowed to participate in the market. The Hungarian banking system was widely government run before the first commercial bank was opened by the National Bank of Hungary and five foreign commercial banks were established in 1979. The pioneer role was maintained even during the transition years when foreign-owned commercial banks could establish their subsidiaries. This paper attempts to examine the performance of the Hungarian banking sector once foreign investments occurred, and its functions as well as its stability in the transition period before the implementation of the Basel II Accord. It also reveals the doubts policy makers had about the Basel II Accord and its affect on the lending behavior of banks.

Suggested Citation

  • Csizmazia, Roland Attila, 2014. "The Development of the Hungarian Banking Sector Prior to Basel II," MPRA Paper 54343, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54343
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    References listed on IDEAS

    as
    1. Katalin Mérõ & Balázs Zsámboki & Edit Horváth & András Bethlendi & Anna Naszódi & Anikó Szombati & István Czajlik, 2003. "Studies On The Potential Impacts Of The New Basel Capital Accord," MNB Occasional Papers 2003/27, Magyar Nemzeti Bank (Central Bank of Hungary).
    2. Majnoni, Giovanni & Shankar, Rashmi & Varhegyi, Eva, 2003. "The dynamics of foreign bank ownership - evidence from Hungary," Policy Research Working Paper Series 3114, The World Bank.
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    More about this item

    Keywords

    Basel II; Hungary; privatization; foreign ownership; banking stability; pro-cyclicity;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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