By Brian Quinn, Executive Director, Financial Stability at the Bank of England.
Brian Quinn, Executive Director, Financial Stability at the Bank, considers some of the challenges confronting banks and banking supervisors in countries making the transition from command to market economies. Among the general problems facing banks is the need to conduct their business in step with the changing pattern in the wider economy; more specifically, they have often inherited poorly-performing loans from the previous regime, and have to operate in money markets that are not yet well developed. A number of supervisory elements seem particularly important for countries in transition: including adequate assessment of the fitness and properness of a bank’s owners, directors and managers—and of the links between a bank and its owners—and the assurance of adequate capital, given the uncertain operating environment.
Banking supervision in the transitional economy