Publication detail

Getting Institutions Right: Reforms of Banking Sectors in the Czech Republic and Romania

Author(s): PhDr. Zdeněk Kudrna PhD.,
Type: Articles in refereed journals
Year: 2005
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Grants: IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: In this paper the hypothesis on the path of the institutional reform of the banking sector in transition economy is formulated and tested by the means of comparative case study. I hypothesize that successful reforms proceed in the following sequence: (i) creation of an independent regulator with limited capacities; (ii) gradual introduction of the international regulatory standards; (iii) dealing with the domestic vested interests; and (iv) creating constituency for implementation of evolving best practices (privatization). Focusing on the third stage, I claimed that two factors are instrumental for overcoming the opposition of vested interests: (i) increasing awareness about the unsustainability of high and growing proportion of non-performing assets (threat of banking crisis) and (ii) pressure from the European Union and the World Bank for implementation of the international standards. The empirical case studies of the institutional change in the Romanian and Czech banking sectors are corroborative to the hypothesis, despite substantial differences in the level of economic and political development as well as in economic performance during the transition years. Tentative policy lessons regarding implementation of international standards in transition economies are formulated in conclusion.
Downloadable: Paper for Coase Workshop


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