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The Polish experience with bank and enterprise restructuring

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  • Montes-Negret, Fernando
  • Papi, Luca

Abstract

Among transitional economies, Poland was a pioneer in bank and enterprise restructuring, tackling it through innovative pro tempore legislation which linked bank recapitalization to improvements in the bank's operating systems, aiming at increasing efficiency and loan recovery. The approach encouraged banks to play a central role in enterprise restructuring. In this paper, the authors critically and comprehensively analyze the Polish approach, presenting and discussing its pros and cons, describing the program's implementation, and providing a preliminary evaluation of the results. One result is that the banking sector now resembles that of a modern market economy in its structure, efficiency, and profitability; sector competition is increasing; interest rates are declining; and the menu of financial services is growing. It is not yet clear whether enterprises have been put on a permanently healthy and viable path, although some positive results noted are linked to the central role of banks in enterprise governance, such as maintaining incentives to avoid unloading debt onto the government, resolving conflicts between creditors without triggering unnecessary liquidations, and avoiding excessive use of bankruptcy procedures. The general lesson is that bank recapitalizations have to be accompanied by additional restructuring measures to resuscitate the banking sector, which may serve as the engine to successfully drive enterprise restructuring.

Suggested Citation

  • Montes-Negret, Fernando & Papi, Luca, 1997. "The Polish experience with bank and enterprise restructuring," Policy Research Working Paper Series 1705, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1705
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    References listed on IDEAS

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    Cited by:

    1. Clas Wihlborg, 2002. "Insolvency and Debt Recovery Procedures in Economic Development: An Overview of African Law," WIDER Working Paper Series DP2002-27, World Institute for Development Economic Research (UNU-WIDER).
    2. Gerald A. McDermott, 2000. "Network Restructuring and Firm Creation in East-Central Europe: A Public-Private Venture," William Davidson Institute Working Papers Series 361, William Davidson Institute at the University of Michigan.
    3. Gerald A. McDermott, 2003. "Institutional Change and Firm Creation in East-Central Europe: An Embedded Politics Approach," William Davidson Institute Working Papers Series 2003-590, William Davidson Institute at the University of Michigan.
    4. Jacek Kochanowicz & Piotr Kozarzewski & Richard Woodward, 2005. "Understanding Reform: The Case of Poland," CASE Network Reports 0059, CASE-Center for Social and Economic Research.
    5. Debora Revoltella & Peter R. Haiss & Gerhard Fink, 1998. "Corporate Governance in Central and Eastern Europe - Transition management is a tough job," SUERF Studies, SUERF - The European Money and Finance Forum, number 3 edited by Morten Balling, May.
    6. Dado, Marinela E. & Klingebiel, Daniela, 2002. "Decentralized credtor-led corporate restructuring - cross-country experience," Policy Research Working Paper Series 2901, The World Bank.
    7. Gerald A. McDermott, 2004. "The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe," William Davidson Institute Working Papers Series wp726, William Davidson Institute at the University of Michigan.

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