Financial and Enterprise Restructuring in Emerging Market Economies

Fries, Steven; Lane, Timothy

doi:10.5089/9781451978858.001

Cited by 8 publications

(5 citation statements)

References 20 publications

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“…In some countries, Hungary, for example, bad loans are the result of mismanagement of the banking system during the Communist period (Bonin and Schaffer, 1995). In others, such as Slovakia (Sobek, 1995), bad loans have increased since the end of Communism (Fries and Lane, 1993). In Poland, although bad debts are a large proportion of total debt, they are highly concentrated and affect only 10 per cent of firms (Gomulka, 1994).…”

Section: Reformingfinancial Systems In Transition and Developing Econmentioning

confidence: 98%

“…Several problems have been identified in various studies as preventing an efficient allocation of credit to worthwhile projects in transition economies. First, substantial stocks of non-performing loans have serious negative effects on the entire banking system, as they dilute the discipline role of debt and create moral hazard, adverse selection, and a general distortion of incentives (Fries and Lane, 1993;Schiitte, 1992). The origins and impact of the problem differ across countries.…”

Section: Reformingfinancial Systems In Transition and Developing Econmentioning

confidence: 99%

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Restructuring financial systems in transition and developing economies: an approach based on the French financial system

Bertero¹

1997

Economics of Transition

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The aim of this paper is to contribute to the debate on the redesigning of financial systems in Central and Eastern European and developing countries by focusing attention on specific financial institutions appropriate to easing the transition and fostering the creation of markets. The paper argues that the immediate emulation of the better-known institutions of the most developed, market-based financial systems, i.e. the US and the UK, should not be taken for granted. It underlines, instead, the importance of drawing inspiration from the experiences of a variety of institutions and financial systems. Particularly relevant are those systems that have experienced forms of transition and a mix, over time, of market and state intervention. Copyright The European Bank for Reconstruction and Development, 1997.

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Section: Reformingfinancial Systems In Transition and Developing Econmentioning

confidence: 98%

Section: Reformingfinancial Systems In Transition and Developing Econmentioning

confidence: 99%

Restructuring financial systems in transition and developing economies: an approach based on the French financial system

Bertero¹

1997

Economics of Transition

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“…International experience shows that a centralized approach is chosen over a decentralized one when the following issues are important: (i) quick removal of bad loans from the balance sheet of distressed banks to facilitate bank privatization; (ii) there is a close "symbiotic" relationship between banks and enterprises that needs to be cut and persistent bank lending to loss-making firns that needs to be stopped; and (iii) enabling a centralized agency to pursue enterprise restructuring after gaining control over 36 enterprises 35 Van Wijnbergen (1998) points out that banks should be the 'agents of change' in the restructuring of enterprises due to the informational advantage they have over publicly owned centralized collection agencies. 36 Fries and Lane (1994).…”

Section: Country Experiencesmentioning

confidence: 99%

Banking Crises in Transition Economies: Fiscal Costs and Related Issues

Tang¹

1999

Policy Research Working Papers

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Tang, Zoli, and Klytchnikova look at strategies for and low levels of intermediation. The Baltic states appear dealing with banking crises in 12 transition economies-to have struck a good balance, incurring modest fiscal five from Central and Eastern Europe (CEE): Bulgaria, costs while making their systems sounder and more the Czech Republic, Hungary, Macedonia, and Poland; efficient. the three Baltic states: Estonia, Latvia, and Lithuania;The findings suggest the following: and four countries from the Commonwealth of -Operational, financial, and institutional restructuring Independent States (CIS): Georgia, Kazakhstan, the should be undertaken in parallel. Kyrgyz Republic, and Ukraine.* Financial restructuring should involve adequate Three types of strategies were used to deal with the recapitalization to deter moral hazard and repeated crises. The CEE countries generally pursued extensive recapitalization. restructuring and recapitalizing of banks; most CIS * Operational restructuring should entail privatization countries pursued large-scale liquidation; and the Baltic to core investors (particularly to reputable foreign states generally pursued a combination of liquidation and banks). restructuring.* The enterprise problems underlying banking The strategy pursued reflected macroeconomic problems must also be addressed. conditions and the level of development in a country's e Fiscal costs were reduced when governments dealt banking sector. There were more new banks in the only with bad debt inherited from the socialist period; former Soviet Union (FSU-the CIS and Baltic states), when small banks that held few deposits were allowed to but they tended to be small, undercapitalized, and not fail, where the social costs of such failure were low; and deeply engaged in financial intermediation.when only banks that got into trouble because of The CEE countries generally incurred higher fiscal external shocks were rescued while those suffering from costs than the FSU countries but ended up with sounder, poor management were liquidated. more efficient banking systems, with many of the * The government, not the central bank, should recapitalized banks being privatized to strategic foreign undertake bank restructuring. Central bank refinancing is investors. The CIS countries pursued a less fiscally costly not transparent and could lead to hyperinflation. approach but have been left with weak banking systems This paper-a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region-is part of a larger effort in the region to review lessons of experience in transition economies. Copies of the paper are available free from the World Bank,

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“…Another alternative, raised by Fries and Lane (1994), is for the AMC to get a return on physical assets by leasing them rather than selling. While not much used in practice, this avoids the problem of potential buyers being reticent to commit themselves to outright purchase before a lengthy evaluation.…”

Section: Management and Sale Ofassetsmentioning

confidence: 99%