INTERNATIONAL MANAGEMENT

International Management

International Management

The Eastern European banking market: Market application strategies

The banking parts in the CEEC are distinuished by a very high grade of foreign occurrence (Table 1). In Hungary, Czech Republic, and Estonia foreign banks command more than 80% of the total banking capital. The biggest five foreign proprietors in the CEEC constitute KBC Bank, Erste Bank, HVB Group, Societe Generale and Unicredito Italiano (Table 2). It is so straightforward to observe a local specialization of some foreign banks. Large Scandinavian banks (Swedbank and Skandinavska Enskilda) effectively monopolize banking markets of the Baltic states, and Greek banks (National Bank of Greece, Piraeus Bank, Alpha Bank, Emporiki Bank of Greece) have a foothold only in the Balkan countries. At the identical time, Austrian banks (Erste Bank, HVB Group1, Raiffeisen) command large portions of banking assets in all CEEC, except for the Baltic states. There are furthermore a couple of demonstrations when CEE banks have stakes in banks of other CEEC. For demonstration, Hungarian OTP bank came by banks in Bulgaria and Slovakia, and Latvian Parex bank took over Lithuanian AB Industrijos Bankas. Mian (2005) accounts that there are important expanse constraints for foreign banks and finds that as the geographical expanse between banks and the owner homeland rises, so manage the data and bureau costs. Therefore, it is not astonishing to glimpse that foreign banks go in homeland with more well renowned heritage and communal culture, and whose financial, political and communal natural environment they understand the best.

The application of foreign proprietors into the CEEC banking markets has not habitually been so easy. In the starting of 90s, only couple of foreign banks went into the CEEC by setting up greenfield institutions. This was inspired by two factors: need of support for foreign bank ownership in the CEEC and reduced attractiveness of these nations before embarking on functional reforms.

The established greenfield banks pursued foreign enterprises into CEEC and concentrated their procedures on them. At the identical time they were revising localized markets for opportunities.

These greenfield banks increased quickly in the CEEC, and they have furthermore came by large household banks when privatization method started.

The first homeland in the CEEC to ask for foreign strategic investors was Hungary. Until 1994 foreign investors were restricted to few portions in Hungarian banks. The Hungarian banking part, although, was pain from loose allowance constraints and lesson hazard difficulties, producing from recurring bank recapitalizations between 1993-1994. In alignment to advance business governance of banks and decline fiscal charges of recapitalizations the agreement was come to in 1994 to privatize banks to strategic foreign investors. The method was accomplished by the end of 1997 when all large banks were controlled by foreign owners. The only exclusion was OTP, the biggest Hungarian savings bank, that was privatized through the public proposing on the supply exchange to institutional investors, without a lone most owner.

Baltic states have furthermore been very fast in asking for foreign investors, although foreign banks were adept to conquer strategic ownership only after the Russian urgent ...