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REGIONAL INTEGRATION CHALLENGES IN SOUTH EAST EUROPE: BANKING SECTOR TRENDS

George Stubos
Bank of Greece

Ioannis Tsikripis
Bank of Greece

ABSTRACT

This study reviews and evaluates a particular aspect of the institution building process in the transition countries of Southeast Europe. The focus is the development of the banking sector. It is argued that banking sector development plays an integral and pivotal role in the successful completion of the transition process. It functions as a very strong integrating force contributing to the broader institution building process and as a pillar of future growth and development in the new market environment of the Balkan economies. This study concentrates on three main issues. First, it undertakes a brief literature review of regional integration approaches in the Balkans. Second, it provides an overview of the most significant changes that have taken place in the banking sector. Third, it reviews some structural characteristics and performance indicators, all of which point to considerable advancements made in this sector in recent years. Empirical evidence is provided showing that a substantial harmonisation of ownership structures and performance indicators has been achieved in the banking sectors of these countries initiating a convergence process toward EU banking structures and functions. In this regard, this study complements the findings of other studies focusing on various sectors of economic activity, which clearly show that a de facto regional and, even more so, continental integration of the Southeast European countries is under way.

Keywords: Balkan banking; foreign banks; regional integration; transition policies

JEL classification: R10; P30; G21

Acknowledgements
We are grateful to George Tavlas, Heather Gibson and Christos Papazoglou for their valuable comments and to Stella Adamopoulou for her editorial suggestions. The views expressed in this paper are those of the authors and do not necessary reflect those of the Bank of Greece.

Address for correspondence:

George Stubos
Bank of Greece, 21 E. Venizelos Ave.
102 50, Athens, Greece
Tel.: + 30 210-320 2685
Fax.: + 30 210-320 3922
E-mail: gstubos@bankofgreece.gr


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