Banking in Central and Eastern Europe since the Turn of the Millennium — An Overview of Structural Modernization in Ten Countries

This study gives an analytical overview of the evolution of the banking sectors of ten relatively large Central and Eastern European countries (Hungary, Poland, the Czech Republic, Slovakia; Bulgaria, Romania, Croatia, Serbia; Russia and Ukraine) since 1999—2000. Set in the period following the banking crises and painful transformation of the 1990s, the analysis focuses on the newest structural changes and modernization in an environment of generally strong growth. The emphasis is on salient features of the development of banking regulation and supervision, banks' major sources of assets, liabilities, earnings and related changes, bank restructuring, rehabilitation programs and the role of foreign banks and FDI. Conclusions sum up the main findings on a comparative basis: Selling banks to foreign strategic investors has generally paid off, although there are some exceptions. The ongoing swift dissemination of IT and e-banking may help reconcile the seeming paradoxes of these countries being "overbanked" and "underbanked" at the same time. The near-ubiquitous credit boom, while embodying a welcome structural catching-up process, is not without dangers and has not yet been fully brought under control. Even in relation to the region's modest income levels, consumption of banking products remains low in Central and Eastern Europe. Thus, there is still ample room for expansion.