Tuma, Zdenek --- "Banking sector development in the Czech Republic" [2003] ELECD 105; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Structural Challenges for Europe" (Edward Elgar Publishing, 2003)

Book Title: Structural Challenges for Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843764748

Section: Chapter 5

Section Title: Banking sector development in the Czech Republic

Author(s): Tuma, Zdenek

Number of pages: 21

Extract:

5. Banking sector development in the
Czech Republic
Zdenek Tuma
°

1. INTRODUCTION

At the time of writing, the financial sector of the Czech Republic finds itself
in the final stage of reform. Now that the privatization of large banks has
been completed, the banking sector is dominated by foreign strategic
owners, most of them EU-based banks. These owners are expected to bring
much-needed modern banking expertise, improve the efficiency of domes-
tic banks and prepare them for the challenges of EU and EMU accession.
After extensive clean-ups of portfolios, the banks' prudential indicators
have improved significantly. The regulation of the banking sector has been
largely standardized, and the remaining challenges are broadly similar to
those faced by financial regulators in advanced countries, too.
The path from the beginning of transition to this promising stage has not
been an easy one, though. Reform has come at a substantial cost, both in
terms of macroeconomic inefficiencies in the allocation of resources and in
terms of public expenditures. The aim of this chapter is to describe these
reform processes, focusing in particular on the current situation and future
prospects.
The chapter is organized as follows. In section 2, I give a short overview
of the starting conditions and the early years of transition. Section 3 pre-
sents the major developments and reform steps in 1994­2001, including the
public and macroeconomic costs. Section 4 describes the current situation
of the Czech banking system and its outlook. Section 5 summarizes and
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