Bonin Speaks on Foreign-Owned Banking at Economics Meeting

John Bonin, the Chester D. Hubbard Professor of Economics and Social Science, tutor in the College of Social Studies, led the Presidential Address during the Allied Social Science Association American Economic Association meetings in Atlanta, Ga. Jan. 3-5.

As outgoing president of the Association for Comparative Economic Studies (ACES), Bonin spoke on “From Reputation Amidst Uncertainty to Commitment Under Stress: A Decade of Foreign-owned Banking in Transitioning Economies.”

He focused on the experiences of 10 transition countries (Czech Republic, Hungary, Poland, Slovakia, Slovenia, Bulgaria, Romania, Croatia, Serbia and Russia) regarding the reforming, or developing, of their banking sectors.

In all but Russia and Slovenia, foreign banks (basically six large European banking groups) dominate the banking sector with ownership percentages of banking assets ranging from 67 to 99 percent.

“The manner in which this came about was basically through acquisitions and mergers of formerly state-owned banks,” Bonin explains. “These hybrid banks combine both foreign expertise and local knowledge, which are somewhat unique to this region.”

After 2004, Bonin says, the retail banking in these countries saw dramatic growth.

During the address, Bonin also probed the potential impact of the global financial crisis on banking in these countries. He is preparing a paper based on the address which will be published in Comparative Economic Studies, a professional journal sponsored by ACES.

At the meeting, Bonin also organized and presided over a panel titled “The Great Transformation After 20 Years: What is Left to be Done?” with panelists Justin Lin, the chief economist at the World Bank; Erik Berglof, the chief economist at the European Bank for Reconstruction and Development; Joseph Stiglitz, professor of finance and business at Columbia University; Sergei Guriev, rector at the New Economics School in Moscow; and Peter Murrell, professor of economics at the University of Maryland and president ACES 2010.

He also served as a discussant in a panel on “Firm-level Innovation and Productivity in Developed and Transition Economies.”