A Comparison And Research On The Reform Of Banking System In Hungary,Poland And Russia

Since 1980's of last century, Hungary, Poland and Russia had all tried toreform their financial system in order to release the capital allocation from thecentral bank's control step by step and applied the dual-banking system underwhich the central bank and the commercial banks are separated from eachother . Through years of reform, the banking system of these countries havegained different performances. Comparatively speaking, the financial reformin Hungary and Poland is much better on the aspect of dealing with financialcrisis, while the financial situation in Russia has always been difficult due tothe unsuccessful financial reform which brings little good effects. So tosummarize the experiences and lessons of the banking system reform intransition countries can be very useful to other countries that are makingtransition to the market economy.This article consists of four parts:In the first part, the author discusses the meaning and inter relationship ofthe economic transformation, financial reform and banking system reform, andthe author also makes a brief introduction of the samples analyzed in thearticle .In the second part, choosing the banking reform courses in Hungary,Poland and Russia as the main line of discussing , the author makes a detaileddiscussion on the policy combination and the choice of reform mode in thesethree countries .1. Introduction of the background of the banking system reform intransition countries. Banking system reform is a big challenge faced by thetransition countries during their economic transformation. The banking systemin transition countries are highly concentrated and state-owned under thecentral planned economic system. The banking activity monopolized by thegovernment lead to many problems. First, the highly concentrated bankingsystem weakens the competition among banks and hampers the emergence ofnew banks, also makes the improvement of banks slowly. Second, whengovernment's decision become the dominant factor in most economic areas,"politics priority "can easily influence the capital allocation and management.So the first goal of banking system reform in the transition countries is toremove the state monopoly to set up the dual banking system in order toprevent government intervening in the financial activities and formalize thefinancial activities of banks. Only in this way, a new financial system, which isled by the central bank and consists of commercial banks and other financialinstitutions, can be formed. The new financial system should also beeffectively regulated in macroscopic and facilitate competition in microscopic.2. Introduction of the banking reform history in Hungary. First, Hungaryset up the dual banking system by separating the commercial banks from theold central-bank-controlled banking system and made a real independentcentral bank who takes charge in the monetary policy and foreign exchangepolicy. After that, during 1992 to 2000, the Hungary government started tostrengthen the state-owned banks, by dealing with the large amount of badloans accumulated in the central planned periods. Through issuing bonds andstocks, the Hungary government recapitalized the state-owned banks that stillcan not improve the performances after the bad loans dealing plan, tried tospeed up the formulation and application of the related discipline, and tostrengthen to supervision of banks. The Hungary government started toprivatized the state-owned banks.3. Introduction of the banking reform history in Poland. Sinceimplementing the radical transition reform in the 1990s, the banking of Polandhas made great progress. The reform includes setting up the dual bankingsystem, reform of the central bank and the commercial banks, dealing with thebad loans, the recapitalizing of capital and the privatizing of the state-ownedbanks. Through the reform of several years, the financial situation of Polandtends to take a favorable turn, the reform offered the chance of developing forbank and enterprise, and excited the enthusiasm of the bank and enterprise.Though process of reform slowed down to some extent because of the plan toprivatize of Poland changed several times, yet but generally speaking, theresult of the reform is still satisfactory, and has got most observers' praise.4. Introduction of the banking reform history in Russia. First,introduction of the reconstruction of the dual banking system, the reform ofthe central bank and the commercial banks and the emergence of the financialand industrial groups. Second, introduction of 'the August Financial Crisis'inRussia and the reconstruction of the banking system after the crisis. Thereconstruction policies include: (1) The government legislated for thebanking reform to make the reconstruction of banking system more effective.(2) Being more cautious and practical, the Russia Central Bank deal with theproblematic banks in different ways. (3) The Russia government and thecentral bank established the Credit Arrangement and ReconstructionCorporation who takes charge in the reconstruction of the banking system. (4)The government Established the Depository Transferring System and improvethe Depository Insurance System in the interest of the depositors, difficultiesof the coming reform are also decreased.In the third part, the author compares the performances of the bankingsystem reform in Hungary, Poland and Russia and analyzes the main reason ofthe differences of such performances in these countries.1. To compare and analyze the performances of the banking systemreforms in Hungary, Poland and Russia on the aspect of the financial statistics,the effect of the banking system reform on economic growth, the wholeoutcome of the banking system reforms, and etc. Compared with the singlecentral planned banking system, Russia is making much progress, but it is still...