Importance of the banking sector in transition economies
Commercial banks have played and will play a very important role in transition economies. But, to fulfil the demanding task of efficient financial intermediary, the banking sector must to undergo significant changes. It must be de-politicized, restructured, privatized, in short, it has to become completely different from what it was before transition started.
By late 1998, following a slow stream of bank failures, the Croatian National Bank, responsible for banking supervision, was faced with a difficult decision – to either rescue more banks through costly rehabilitation schemes that would add to the public debt, or to initiate bankruptcy proceedings.
This case study is presented by Marko Skreb, who was Governor of the Croatian National Bank at the time of the Croatian banking crisis.
The Basel Core Principles on Effective Banking Supervision, issued by the Basel Committee in September 1997, sets out important issues for banking supervisors. This case draws on the following Core Principles and the associated Essential Criteria…