SOME ASPECTS OF RESTRUCTURING THE BANKING SYSTEMS OF THE CIS COUNTRIES

Abstract

The CIS economies inherited banking sectors consisting of a few specialized state-owned banks with large portfolios of bad debts requiring recapitalization and restructuring. There was no banking regulation. The situation was aggravated by the onset of hyperinflation, which caused colossal macroeconomic imbalances and uncertainty. In such conditions, the share of problem loans in banks' portfolios increased, and their solvency worsened. Banks also faced enormous difficulties in attracting deposits, as households avoided having bank accounts as inflation rapidly eroded their purchasing power. It is not surprising that banking crises in the CIS countries were initially systemic in nature. Therefore, the elimination of banking crises, including through the restructuring of banking systems in these countries, can and should be considered in close connection with the systemic socio-economic crisis that has struck the transition economies. Most CIS countries experienced more than one banking crisis during the 1990s. The problems that the banking systems of different countries faced and that led to their restructuring were different in nature and it is difficult to draw clear distinctions.