Corporate governance in central Europe: the role of banks

BIS Economic Papers No 42
August 1994

Abstract

This paper analyses the banking systems of former Czechoslovakia, Hungary and Poland in a comparative perspective with the aim of determining whether they can play a role in improving the corporate governance of large enterprises. Five dimensions are investigated: nonperforming loans, changes in bank behaviour, the framework for bank industry relations, prudential regulation and supervision, and competition. It is shown that bank behaviour changed dramatically in 1992 in response non-performing loans which came to light and tighter bank regulation. Nonetheless, the analysis suggests that to involve banks in corporate governance now is not without risks and that banking supervision in particular needs to be strengthened further.

JEL classification: P34, P52, G21, G28