Eastern European Banking Model

A traditional banking model in a CEEC (Central and Eastern European Country) consisted of a central bank and several purpose banks, one dealing with individuals’ savings and other banking needs, and another focusing on foreign financial activities, etc. The central bank provided most of the commercial banking needs of enterprises in addition to other functions. During the late 1980s, the CEECs modified this earlier structure by taking all the commercial banking activities of the central bank and transferring them to new commercial banks. In most countries the new banks were set up along industry lines, although in Poland a regional approach has been adopted.

On the whole, these new stale-owned commercial banks controlled the bulk of financial transactions, although a few ‘de novo banks’ were allowed in Hungary and Poland. Simply transferring existing loans from the central bank to the new state-owned commercial banks had its problems, since it involved transferring both ‘good’ and ‘bad’ assets. Moreover, each bank’s portfolio was restricted to the enterprise and industry assigned to them and they were not allowed to deal with other enterprises outside their remit.

As the central banks would always ‘bale out’ troubled state enterprises, these commercial banks cannot play the same role as commercial banks in the West. CEEC commercial banks cannot foreclose on a debt. If a firm did not wish to pay, the state-owned enterprise would, historically, receive further finance to cover its difficulties, it was a very rare occurrence for a bank to bring about the bankruptcy of a firm. In other words, state-owned enterprises were not allowed to go bankrupt, primarily because it would have affected the commercial banks, balance sheets, but more importantly, the rise in unemployment that would follow might have had high political costs.

What was needed was for commercial banks to have their balance sheets ‘cleaned up’, perhaps by the government purchasing their bad loans with long-term bonds. Adopting Western accounting procedures might also benefit the new commercial banks.

This picture of state-controlled commercial banks has begun to change during the mid to late 1990s as the CEECs began to appreciate that the move towards market-based economies required a vibrant commercial banking sector. There are still a number of issues lo be addressed in this sector, however. For example, in the Czech Republic the government has promised to privatize the banking sector beginning in 1998. Currently the banking sector suffers from a number of weaknesses. A number of the smaller hanks appear to be facing difficulties as money market competition picks up, highlighting their tinder-capitalization and the greater amount of higher-risk business in which they are involved. There have also been issues concerning banking sector regulation and the control mechanisms that are available. This has resulted in the government’s proposal for an independent securities commission to regulate capital markets.

The privatization package for the Czech Republic’s four largest banks, which currently control about 60 percent of the sector’s assets, will also allow foreign banks into a highly developed market where their influence has been marginal until now. It is anticipated that each of the four banks will be sold to a single bidder in an attempt to create a regional hub of a foreign bank’s network. One problem with all four banks is that inspection of their balance sheets may throw up problems which could reduce the size of any bid. All four banks have at least 20 percent of their loans as classified, where no interest has been paid for 30 days or more. Banks could make provisions to reduce these loans by collateral held against them, but in some cases the loans exceed the collateral. Moreover, getting an accurate picture of the value of the collateral is difficult since bankruptcy legislation is ineffective. The ability to write off these bad debts was not permitted until 1996, but even if this route is taken then this will eat into the banks’ assets, leaving them very close to the lower limit of 8 percent capital adequacy ratio. In addition, the ‘commercial’ banks have been influenced by the action of the national bank, which in early 1997 caused bond prices to fall, leading to a fall in the commercial banks’ bond portfolios. Thus the banking sector in the Czech Republic still has a long way to go.

In Hungary the privatization of the banking sector is almost complete. However, a state rescue package had to be agreed at the beginning of 1997 for the second-largest state bank, Postabank, owned indirectly by the main social security bodies and the post office, and this indicates the fragility of this sector. Outside of the difficulties experienced with Postabank, the Hungarian banking system has been transformed. The rapid move towards privatization resulted from the problems experienced by the state-owned banks, which the government bad to bail out, costing it around 7 percent of GDP. At that stage it was possible that the banking system could collapse and government funding, although saving the banks, did not solve the problems of corporate governance or moral hazard. Thus the privatization process was started in earnest. Magyar Kulkereskedelmi Bank (MKB) was sold to Bayerische Landesbank and the EBDR in 1994, Budapest Bank was bought by GE Capital and Magyar Hitel Bank was bought by ABN-AMRO. In November 1997 the state completed the last stage of the sale of the state savings bank (OTP), Hungary’s largest bank. The state, which dominated the banking system three years ago, now only retains a majority stake in two specialist banks, the Hungarian Development Bank and Eximbank.

The move towards, and success of privatization can be seen in the balance sheets of the banks, which showed an increase in post-tax profits of 45 percent in 1996. These banks are also seeing higher savings and deposits and a strong rise in demand for corporate and retail lending. In addition, the growth in competition in the banking sector has led to a narrowing of the spreads between lending and deposit rates, and the further knock-on effect of mergers and small-hank closures. Over 50 percent of Hungarian bank assets are controlled by foreign-owned banks, and this has led to Hungarian banks offering services similar to those expected in many Western European countries. Most of the foreign-owned but mainly Hungarian-managed banks were recapitalized after their acquisition and they have spent heavily on staff training and new information technology systems. From 1998, foreign banks will be free to open branches in Hungary, thus opening up the domestic banking market to full competition.

As a whole, the CEECs have come a long way since the early 1990s in dealing with their banking problems. For some countries the process of privatization still has a long way to go but others such as Hungary have moved quickly along the process of transforming their banking systems in readiness for their entry into the EU.

Read More

The Art of Mastering

Factors to Consider When Looking for the Best Las Vegas Realty Services

Choosing for a new house in Las Vegas can be disappointing everybody who doesn’t have the experience with the Las Vegas real estate. If you want to make your house search successfully you should look for Lass Vegas realty services. However, lo looking for real estate realty service isn’t easy either because many companies provide relocating services and you will not be sure which company provides the best real estate services. In this article, we will be sharing some of the factors that you need to consider when you are selecting the best company to deal with when you are buying a new home in Las Vegas.

First, if you have friends, colleagues, or family members that have relocated to Las Vegas you should ask them about the realtor services they used. With that kind of information, you will have an idea of where to start with your selection for Las Vegas realty hence saving your time. However, you need to make sure the person is happy with how the company carried the whole process. This is because if your colleague, friend or family wasn’t happy with some aspects of the company you need to know that you are also likely to experience the same if you hire the company services.

The comments and reviews from online clients is also another factor that you need to consider. Most service providers have a site where their clients can comment about their services and also they are registered with review sites like Google BBB Yelp and other sites for clients rating. All this will help the company to know what the clients feel about their relocation services and the areas they need to improve. If you check such information also you will be known whether this is the best company to consider as your real estate agent or not. The best company to hire is the one that has satisfied many of their clients and also has a high rating in the review site.

The company experienced in the business is the other tip to consider. When you are looking for Las Vegas realty make sure to find the company that has many years of experience in the business. The more the company continues to offer to relocate services to clients the more exposed they become to the business hence they can offer better services than before their clients.

The next factor that you need to consider is the approach used by the company to find you your next home. The best company to deal with is the one that wants to know to hear your home needs first so that they will find you the home that meets your expectations. Some real estate agents believe they have experience in the business hence they don’t have to consult anything from you making their services poor. The best Las Vegas realty providers will consult before they take any step.

Also, you must consider the fee charged by the company. Even if the company provides the best services but you cannot afford their expensive services then it doesn’t make sense to you. Look for the company with affordable realty services so that you will spend within your budget without surpassing it.

Practical and Helpful Tips:

: 10 Mistakes that Most People Make

Read More

A 10-Point Plan for (Without Being Overwhelmed)

Factors to Consider When Searching for the Best Auction Company

If you have an item to sell and you want to sell it through an auction company, you should consider getting the best so that you can sell what you have to the highest bidder. There are many benefits that you will enjoy when you work with an auction company, and thus, when searching for a good auction company to sell through, then you should check out for some properties. The number of auction service companies has risen over the years, and therefore settling for the best would require that you research and compare the different companies that are there. This post will give a clear picture of what you should check out in an auction company.

You should first consider the items you have and want to be sold. There are many and different auction companies, and each specializes in the sale of different products and services. Therefore when you consider the item you have, then you will easily get an auction company that will help sell the product you have. After you consider the item you want to be sold, then you should start comparing the different companies that are there that will help auction the item you have.

It would also be crucial that you check out the marketing strategies of the auction company. If you want to make a lot of money selling the item, you have a good auction company should have the best ways of bringing a lot of people who will bid for the items you have. When you choose an auction company that does this, then you will raise your chances of getting the highest prices from peoples’ bids. Therefore investigate to check out the marketing plans that an auction company would have for its clients.

You will benefit if you settle for an auction company that has the right experience. A company that has done this for many years will have the skills and the required knowledge to auction the different items that you may have. Practice makes perfect, and thus, you will be assured of excellent services that will satisfy you. The many years in this field will enable the company to gain a deeper understanding of the tasks that they are involved in this way, giving the best services. Researching will enable you to get such an auction company.

You should also check out an auction company that is involved with the sale of multiple items. When you get an auction company that can sell a variety of items, then you will raise your chances of selling whatever item you have. Different auction companies sell different items; for instance, there are those who auction cars and many other items that you could have. Therefore when you check out for a company that auctions different items, then you will be able to see if it can serve your needs. Consider these guidelines and check out the best auction company to sell your items.

Interesting Research on – What You Didn’t Know

Lessons Learned from Years with

Read More

The Ultimate Guide to

What Entails the Best Deal on a Car

In a year, most countries sell over seventeen million cars. This means that a lot of people are able to find and then buy their dream cars. It is certain for a person who is ready to purchase a car to get a bit overwhelmed at the thought of negotiating with a sales representative. This is so because purchasing a car is usually a great deal and one feels the need to buy the right car for themselves while at the same time get the best deal possible. It is recommendable that a person to does their homework first before stepping foot into the dealership since this guarantees them of getting the best deal possible.

It is crucial that you pick a firm that understands the type of car you want and at the same knows they should be aware of the cars cost since this will ensure that you will play catchup in front of the salesman. It is usually vital that you are aware of the worth of your vehicle beforehand, before trading it because this will ensure that you get a fair price for it. Since you already know what you talking about it will be quite hard for people to trick you into buying a car at an unfair cost.

It is vital that you get pre-approved first before you do a serious search on the internet or take your dream car for a test drive. By doing this, you will be aware of the number set that you can afford and then shop for it accordingly. This will make sure that a person is not left felling worse because you love a certain car and was able to buy it. If one shops at the right time of, they year, they are likely to save on huge sums of money. One of the ways you can get the dealership is by being knowing the seasons when the prices of cars are going to hike and when they will fall. The seasons you should avoid buying a car so as to get this dealership is during holidays and popular gift buying seasons.

One way to get the dealership is by keeping your phone in your hand since this will makes the dealer to think that you are double checking everything they says and this will make ensure that they are honest with you. One way of getting the dealership is by making sure that you are respectful and not rude to the dealer all the time. By being respectful, you will ensure that you get into the dealership when both you and the dealer have good feelings for each other.

Read More