Past and present financialization in Central Eastern Europe: the case of Western subsidiary banks

Abstract

By examining the 'post' financial crisis scenario in Central Eastern Europe (CEE) the paper assesses the role of Western banks in the region and how their penetration and 'resilience' is influenced by their parent and subsidiary structure. While taking stock of the variegated post-socialist transformation in CEE, it employs a genealogical method to explore how the universal bank model and its current 'bifurcation' into parent and subsidiary bank provides a lens through which to investigate a new form of dependency within the uneven geography of Europe. In the light of Rudolf Hilferding's theory of the universal bank and the theorization of financial capital, it illustrates how the present form of bank capitalization overlaps with previous forms of imperial expansion. If on one hand subsidiaries sit at the intersection between the core (home country) and the periphery (host country)-reproducing some of the old spatial hierarchy of capitalism; on the other they also enable new patterns of value extraction that go beyond these relations of dependency. Their autonomy in raising capital and in responding to local host jurisdiction in their "second home market" opens a new financial dimension of extractions that escape the oversight of national and regional regulatory regimes.

The (un)usual suspects? Exploring the links between illicit financial flows, Russian money laundering and dependent financialization in the Baltic states

“…Furthermore, this approach goes in line with recent developments in the financialization literature (e.g. Akçay and Güngen, 2022;Apaydin and Çoban, 2022;Dal Maso, 2022).…”

“…First, the dependence of peripheral and semi-peripheral economies on various types of capital and financial flows from the core, which determine their financial variables and their overall economic performance, and make them prone to boom-bust cycles (Becker et al, 2010; Lapavitsas and Powell, 2013; Karwowski and Stockhammer, 2017; Kaltenbrunner and Painceira, 2018; Akcay and Güngen, 2022; Apaydin and Çoban, 2022). Second, dependent financialization is characterized by bank-based financial systems, dominated by foreign institutions and this feature is particularly marked in Eastern Europe (Becker and Jäger, 2012; Sokol, 2017; Dal Maso, 2022). Third, dependent financialization is characterized by the subordinate integration of (semi-)peripheral economies into the international financial system, including that they can only borrow and accumulate reserves in foreign currency and that they have to offer higher interest rates than the core to attract international capital (Bortz and Kaltenbrunner, 2017; Alami et al, 2022).…”

Stuck in 2012: The hesitant geographies of European financial integration since the Eurozone crisis

“…Foreign banks spotted an opportunity such that in 2011, ‘Foreign-owned banks provide 90% of the credit to non-bank residents in “emerging” Europe compared to 30% in “developed” Europe’ (Allen et al, 2011: 3). Cross-border banks investing in these countries benefitted in the crisis period from their own bail out via the €24.5bn Vienna Initiative (Dal Maso, 2022: 11). An S&W periphery also became apparent in the crisis period.…”