Foreign bank presence: the experience of South-East European countries during the transition process

The past 10-15 years have witnessed a great influx of foreign banks in South Eastern European countries. The rise of foreign ownership and control was dramatic. The questions about foreign bank entry in emerging market economies are still being debated. This paper analyses the development of the banking sector during the transition process in South Eastern Europe. We particularly focus on the position of foreign-owned banks, as it turns out that they play an important role in the development of the financial system of these countries. We are interested in addressing concerns regarding the benefits that would bring and/or the costs that would pose. To this end, we use a balance-sheet indicator based analysis to evaluate the financial conditions and performance advantages of foreign banks compared to domestic competitors. In particular, we are interested in analyzing the background and key characteristics of foreign-owned banks compared to the domestic banks. Moreover, by using panel data we try to compare lending patterns and to assess the role of ownership.