BANK REFORM AND BEHAVIOR IN CENTRAL-EUROPE

This paper analyzes the banking systems of the former Czechoslovakia, Hungary, and Poland in a comparative perspective with the aim of deter mining whether bank behavior has changed as a reaction to banking refo rm and the new market environment. It is shown that bank behavior chan ged dramatically in 1992. The paper argues that behavior changed in re sponse to nonperforming loans which came to light and to improved bank regulation and supervision. Nonetheless, much remains to be done to m ake the banking system effective in financial intermediation and corpo rate control.