The Effects of Foreign Entry in Banking Sectors of Transitional Economies

This research project undertook a combined§quantitative and qualitative analysis of the foreign§entry effects on domestic banking in Slovakia during§the first eight years of the country's existence. The§research results suggest that straightforward§assessing of foreign entry effects is difficult as it§largely depends on the specific conditions of the§country's financial sector development. Moreover, the§organisation of financial markets, bank supervision§and regulation as well as legal infrastructure, state§influence and past experience plays a significant§role in shaping domestic banks' behaviour. The§research results have not supported the view that the§opening of financial sectors of transitional§economies or developing countries could lead to§destabilisation or introduces crisis into the systems. §§The foreign banks seemed to explore the market upon§arrival to decide on future strategies. Once§established, however, the banks began to converge in§terms of their activities, if not their attitudes.§Limited offers of creditworthy customers were quickly§substituted with large involvement of their§activities on inter-bank and government debt market.