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Foreign Bank Entry into CESEE Countries in the 1990s and Afterwards

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Foreign-Owned Banks

Part of the book series: Studies in Economic Transition ((SET))

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Abstract

This chapter deals with the theory and evidence of multinational banking and applies it to the specific experience of the CESEE countries which faced an extraordinary interest by foreign investors willing to enter their banking sectors. The CESEE countries are the unique regional markets in the world where foreign ownership is predominant and where foreign players compete directly with local banks. This chapter aims to present and evaluate the experience of the CESEE countries with respect to foreign banking by looking at the underlying decisions to expand in these countries by major foreign players, mainly Western European banks, and the preferred entry mode. The chapter also takes a microeconomic approach, examining the overall performance of foreign-owned vis-à-vis domestically owned banks.

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Notes

  1. 1.

    In the 1980s only with reference to US banking market, see Goldberg and Saunders (1980, 1981).

  2. 2.

    Czech Republic, Hungary, Poland, Slovenia, Slovakia.

  3. 3.

    Belarus, Estonia, Lithuania, Latvia, Moldova, Ukraine.

  4. 4.

    Albania, Bosnia Herzegovina, Bulgaria, Croatia, Kosovo, Montenegro, Macedonia, Romania, Republic of Serbia.

  5. 5.

    However, as we saw in paragraph 3.2, foreign banks mainly entered transition economies by means of mergers and acquisitions of local banks so that this knowledge should not have been so difficult to acquire. Another reason for this preference is the attractiveness of this market segment (households) relative to enterprises in periods of economic growth and low banking penetration in the household market. In fact, the initial phase of expansion of a new market/business area is the one that delivers the highest margin at the lowest level of risk (cream skimming).

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  1. University of Milano-Bicocca, Milan, Italy

    Paola Bongini

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Bongini, P. (2018). Foreign Bank Entry into CESEE Countries in the 1990s and Afterwards. In: Foreign-Owned Banks. Studies in Economic Transition. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-01111-6_3

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  • DOI: https://doi.org/10.1007/978-3-030-01111-6_3

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-01110-9

  • Online ISBN: 978-3-030-01111-6

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